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job search expenses; and $3,417.69 related to a "not-for-profit"
rental.3 In the notice of deficiency, respondent disallowed the
entire amount for lack of substantiation.
General Legal Principles
We begin by noting that, as a general rule, the
Commissioner's determinations are presumed correct, and that the
taxpayer bears the burden of proving that those determinations
are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111,
115 (1933). Moreover, deductions are a matter of legislative
grace, and the taxpayer bears the burden of proving that he or
she is entitled to any deduction claimed. Rule 142(a); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). This
includes the burden of substantiation. Hradesky v. Commissioner,
65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir.
1976).
Section 162(a) provides that "There shall be allowed as a
deduction all the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business".
Section 6001 and the regulations promulgated thereunder
require taxpayers to maintain records sufficient to permit
verification of income and expenses. As a general rule, if the
3 The $.77 discrepancy between the miscellaneous income
item and the "not-for-profit" rental deduction was not addressed
in the record.
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