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expense). Petitioners argue that their business expenses are
established by the more than 1,000 canceled checks presented by
petitioner at the audit level and by the fact that the deductions
in issue were allowed by respondent in the 30-day letter.
Deductions are a matter of legislative grace, and
petitioners bear the burden of proving that they are entitled to
the deductions claimed except as to increased deficiencies. Rule
142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992);
New Colonial Ice Co. v. Helvering, 292 U.S. 435 (1934).
Taxpayers must keep sufficient records to establish the amount of
their deductions. See sec. 6001; Meneguzzo v. Commissioner, 43
T.C. 824, 831-832 (1965); sec. 1.6001-1(a), Income Tax Regs.
Moreover, a taxpayer who claims a deduction bears the burden of
substantiating the amount and purpose of the item claimed.
Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam
540 F.2d 821 (5th Cir. 1976); sec. 1.6001-1(a), Income Tax Regs.
In the instant case, petitioners provided no books, records,
or checks substantiating the disallowed business expenses. As to
the checks petitioner claims to have presented at the audit
level, we decide petitioners' tax liability on the evidence
produced at trial and not a previous record developed at the
administrative level. Greenberg's Express, Inc. v. Commissioner,
62 T.C. 324, 328 (1974), and case cited therein. Accordingly, on
the basis of the record in the instant case, we conclude that
petitioners have not carried their burden of substantiating the
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