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issuers; Mr. Raclaw used the word "most" to describe income from
Form 1099 issuers, which is true. Dr. Rao may, or may not have,
intentionally confused his accountant; the record is not clear,
and clear and convincing proof is required to prove fraud.
We hold that respondent has not shown, by clear and
convincing evidence, that Dr. Rao intended to omit gross income
from his tax returns. We are bothered by Dr. Rao's attempt to
mislead the IRS agents and lack of record keeping, but we shall
not sustain respondent's determination of fraud when we are only
left with a suspicion of fraud. Green v. Commissioner, 66 T.C.
538, 550 (1976); see Comparato v. Commissioner, T.C. Memo. 1993-
52.
3. Substantiation of Schedule E Expenses
Respondent allowed petitioners Schedule E deductions equal
to the gross rents reported in each of the years in issue, that
is, $45,000, $46,800, and $104,550 for the years 1986, 1987, and
1988, respectively. Respondent disallowed deductions in excess
of gross rents as being unsubstantiated. Petitioners' burden of
proving that respondent's determinations in her deficiency notice
are erroneous includes the burden of substantiation. See
Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), affd. per
curiam 540 F.2d 821 (5th Cir. 1976). Deductions are a matter of
legislative grace; petitioners have the burden of showing that
they are entitled to any deduction claimed. New Colonial Ice Co.
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