- 15 -
Mr. Lavallee himself. In addition, Mr. Conner never disputed
these adjustments during his discussions with respondent.
Deductions from gross income are a matter of legislative
grace, and taxpayers bear the burden of proving that they are
entitled to the deductions they claim. Rule 142(a); New Colonial
Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). This includes
the burden of substantiation. Hradesky v. Commissioner, 65 T.C.
87, 89-90 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).
Taxpayers are required to maintain records sufficient to
establish the amounts of their deductions. Sec. 6001.
Following our review of the record, we conclude that
petitioners have not proven that respondent's position was not
substantially justified. Rule 232(e). We have reviewed Office
Auditor Barrow's workpapers and find her adjustments to be
justified given the information available. In addition, we note
that respondent provided petitioners with Forms 4549 for 1985,
1986, and 1987, which contained the proposed adjustments made by
Office Auditor Barrow. Respondent requested that petitioners
respond to the proposed adjustments, and she informed petitioners
that they could have their case reviewed by respondent's Appeals
Office. Moreover, after petitioners' daughter-in-law advised
respondent that petitioners wanted their case sent to Appeals,
Appeals Officer Holder attempted to schedule two Appeals
conferences with them. Petitioners did not attend either
conference, nor did they ever attempt to arrange another meeting
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