- 38 -
argue that the model code definition would be administratively
burdensome to implement.
Based on the foregoing, petitioner has failed to demonstrate
that the method selected by respondent was clearly unlawful or
plainly arbitrary; therefore, we hold that respondent’s
determination must be upheld, and Investments must utilize a
model code definition of an item.22 Thor Power Tool Co. v.
Commissioner, 439 U.S. at 532; Hamilton Indus. v. Commissioner,
97 T.C. at 129.
Airplane Expenses
Respondent disallowed the deductions arising from
Investments' operation of the airplane to the extent that such
deductions exceeded the airplane rental fees it received.
Respondent based her determination on alternative arguments;
specifically, respondent argued that the excess expenses were (1)
incurred primarily for the benefit of petitioner, (2) not
ordinary and necessary, or (3) unreasonable in amount.
Petitioner asserts that the excess expenditures are allowable.
Deductions are a matter of legislative grace, and the
taxpayer bears the burden of proving that he is entitled to the
22 Respondent’s determination effects a change in Investments’
method of accounting; accordingly, respondent may make a sec. 481
adjustment. Weiss v. Commissioner, 395 F.2d 500, 502 (10th Cir.
1968) (sec. 481 adjustment applies to subch. S shareholders),
affg. T.C. Memo. 1967-125; Hamilton Indus., Inc. & Sub. v.
Commissioner, 97 T.C. 120, 127-128 (1991). The parties may
include this adjustment in their Rule 155 computations.
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