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examination was closed and that they owed approximately $99,783
in taxes, penalties, and interest.
On January 10, 1995, petitioners' house was gutted by fire,
which destroyed all of petitioners' books and records. After the
fire, respondent scheduled several meetings with petitioners to
review the status of their case. Petitioners produced some
additional substantiation of their deductions.
Subsequently, respondent issued a notice of deficiency in
which respondent determined, inter alia, that petitioners were
not entitled to certain Schedule C or Schedule A deductions
beyond the amounts for which they provided substantiation during
the course of their examination. Accordingly, respondent
increased petitioners' income by the amount of the disallowed
deductions. Additionally, respondent disallowed certain
deductions as automatic adjustments resulting from the increase
in petitioners' income.
OPINION
The issue to be decided in the instant case is whether
petitioners have substantiated certain Schedule C business
expense deductions and Schedule A itemized deductions that they
claimed on their 1991 joint Federal income tax return.
Deductions are a matter of legislative grace, and petitioners
bear the burden of proving that they are entitled to the
deductions claimed. Rule 142(a); INDOPCO, Inc. v. Commissioner,
503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292
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