Richard John Kadunc - Page 3

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            constituted gross income for 1991.  Respondent further allowed a                          
            home mortgage interest deduction of $15,600, thereby disallowing                          
            $1,296 of the amount claimed by petitioner.2                                              
            The determinations of the Commissioner in a notice of                                     
            deficiency are presumed correct, and the burden is on the                                 
            taxpayer to prove that the determinations are in error.  Rule                             
            142(a); Welch v. Helvering, 290 U.S. 111 (1933).  Moreover,                               
            deductions are a matter of legislative grace, and the taxpayer                            
            bears the burden of proving entitlement to any claimed deduction,                         
            and that such deduction fits squarely within the ambit of the                             
            statute providing the deduction.  New Colonial Ice Co. v.                                 
            Helvering, 292 U.S. 435 (1934).  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).  A taxpayer is                             
            required to maintain records sufficient to establish the amount                           
            of his or her income and deductions.  Sec. 6001.                                          
            With respect to the State income tax refund, petitioner                                   
            claimed a deduction for State income taxes on his 1990 Federal                            
            income tax return.  During 1991, petitioner received a $1,738                             
            refund of State income tax.  Petitioner admitted receipt of such                          
            refund; however, he failed to include this refund as income on                            

            2     The State of Virginia reported to respondent that, in 1991,                         
            it paid a State income tax refund of $1,738 to petitioner.                                
            Further, Gulf States Mortgage Co., Inc. (Gulf States), reported                           
            to respondent that petitioner had paid mortgage interest during                           
            1991 in the amount of $15,600.                                                            

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