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Insurance Co. Respondent allowed petitioners a deduction for
$7,500 (as a personal interest expense) of the $15,000 claimed.
Petitioners presented no documentation at trial to substantiate
their claim for the investment interest expense deduction.
Preparation of Tax Returns
Petitioners' tax returns for each of the years under
consideration were prepared by their accountant, Donald Fenton.
Mr. Fenton prepared the returns by entering the information
provided to him by petitioners. Mr. Fenton did not receive
documentation to verify or substantiate the deductions claimed by
petitioners; he took the list of expenses they provided to him at
face value. Mr. Fenton was not aware that some of the employee
business expenses claimed by petitioners were, in actuality,
reimbursed by Dr. Novick's employer.
OPINION
Deductions are a matter of legislative grace. New Colonial
Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Taxpayers bear the
burden of establishing that they are entitled to the claimed
deductions. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 114
(1933). This includes the burden of substantiating the amount and
purpose of the item claimed. Sec. 6001; Hradesky v. Commissioner,
65 T.C. 87, 90 (1979), affd. per curiam 540 F.2d 821 (5th Cir.
1976); sec. 1.6001-1(a), Income Tax Regs.
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