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affd. 861 F.2d 131 (5th Cir. 1988). For petitioners to prevail,
respondent's position, as a matter of both fact and law, must not
have been "justified to a degree that could satisfy a reasonable
person." Pierce v. Underwood, supra at 565; Wilkerson v. United
States, supra at 119. Whether respondent's position has a
reasonable basis in fact and law turns in part on whether there
is "substantial evidence" to support it. Pierce v. Underwood,
supra at 564-565; Powers v. Commissioner, 100 T.C. 457, 473
(1993). Respondent must have at least some relevant evidence
sufficient to support her position.
Respondent developed her position in the instant case based
on her examination and investigation of petitioners' returns.
Cf. Powers v. Commissioner, supra. In the notices of
deficiency, respondent premised the adjustments primarily on
petitioners' failure to substantiate items on their returns.
Deductions are a matter of legislative grace, and petitioners
bore the burden of establishing their entitlement thereto.
New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). In
addition, section 6001 imposed on petitioners an affirmative duty
to maintain books and records sufficient to establish items
reported on their returns. It was reasonable for respondent not
to concede the adjustments until she had received and verified
adequate substantiation for the items in question. Harrison v.
Commissioner, 854 F.2d 263, 265 (7th Cir. 1988), affg. T.C. Memo.
1987-52; Sokol v. Commissioner, 92 T.C. 760, 765 (1989).
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