Roger L. and Patricia A. Lavallee - Page 15

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            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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