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and application of funds method. As a result, respondent
determined that petitioner failed to report gross income in the
amount of $4,578. This amount was calculated as follows:
Income:
Gross wages1 $8,707
Gross receipts (Schedule C) 8,010
1993 tax refund 198
Total known sources of income $16,915
Expenses:2
Federal taxes withheld 1,668
Schedule C expenses (as verified) 480
Personal living expenses--
Bureau of Labor Statistics3 19,345
Total expenses (21,493)
Unreported income 4,578
1 In addition to her Schedule C activities, petitioner
worked for Office Depot during the taxable year 1994 and reported
wages earned in the amount of $8,707.
2 On Schedule C of her 1994 return, petitioner claimed cost
of goods sold in the amount of $7,583. Respondent disallowed
petitioner's claimed cost of goods sold, and, accordingly,
respondent's reconstruction of petitioner's income does not
reflect cost of goods sold.
3 Respondent utilized the average annual expenditures for
1994 for one person, U.S. Department of Labor, Bureau of Labor
Statistics. One component of these living expenses is the cost
of shelter in the amount of $4,089.
OPINION
We begin by noting that petitioner bears the burden of
proving that respondent's determination is erroneous. 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 she is entitled to any
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