Donald G. Russell - Page 3

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          not constitute "compensation" for purposes of section                       
          219(b)(1)(B).  Respondent relies on section 1.219(a)-1(b)(3),               
          Proposed Income Tax Regs., 49 Fed. Reg. 2795 (Jan. 23, 1984),               
          which expressly excludes unemployment compensation within the               
          meaning of section 85 as "compensation" for purposes of section             
          219.                                                                        
               Deductions are a matter of legislative grace, and the                  
          taxpayer bears the burden of proving his entitlement to the                 
          claimed deduction.  New Colonial Ice Co. v. Helvering, 292 U.S.             
          435, 440 (1934).                                                            
               Section 219(b) allows a deduction for qualified retirement             
          contributions in "an amount equal to the compensation includable            
          in the individual's gross income", to a maximum of $2,000.                  
          Section 219(f)(1) defines "compensation" as including earned                
          income received by a self-employed individual; however, the term            
          does not include any amount received as a pension or annuity, and           
          does not include any amount received as deferred compensation.              
               Unemployment compensation is defined under section 85(b) as            
          "any amount received under a law of the United States or of a               
          State which is in the nature of unemployment compensation."                 
          Section 1.85-1(b)(1)(i), Income Tax Regs., further explains that            
          the amount of the payments is usually based upon length of prior            
          employment and prior wages.                                                 







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