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For reasons discussed herein, we find that neither the
statute of limitations nor the doctrine of laches precludes
assessment and collection of the deficiencies in and additions to
tax determined by respondent.
Schedule C Expenses
Respondent's determinations are presumed correct, and
petitioner bears the burden of proving otherwise. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Moreover,
deductions are a matter of legislative grace, and petitioner
bears the burden of proving that he is entitled to any deduction
claimed. Rule 142(a); New Colonial Ice Co. v. Helvering, 292
U.S. 435, 440 (1934); Welch v. Helvering, supra at 115. This
includes the burden of substantiation. Hradesky v. Commissioner,
65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir.
1976). Additionally, section 6001 requires petitioner to keep
records sufficient to show whether he is liable for tax.
Petitioner essentially restricts his entire argument to a
contention that respondent has failed to establish that
petitioner fraudulently claimed deductions for the Schedule C
expenses at issue. Whether respondent has met her burden with
respect to the issue of fraud, however, is irrelevant with
respect to the instant issue. That respondent must prove fraud
does not mean that petitioner is free from the burden on the
underlying deficiencies.
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