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determination was substantially justified. Specifically,
respondent contends that the records petitioner maintained were
insufficient to establish the amount of petitioner's gross
income. Petitioner does not dispute this point. In reply,
however, petitioner contends that this contention "evidences
[the] Commissioner's continued obsession that each line item of
gross income must be known with certainty rather than
concentrating [her] attention on taxable income (the quantity on
which the tax is actually calculated)."
We note initially that section 63(a) defines "taxable
income" as gross income minus allowable deductions. Thus, gross
income is the starting point for the computation of taxable
income. In addition, our tax system is based on self-assessment.
Flora v. United States, 362 U.S. 145, 176 (1960). As a result,
the Code and the regulations contain various record keeping
requirements. Section 6001 requires that
Every person liable for any tax imposed by this title
* * * shall keep such records, render such statements, make
such returns, and comply with such rules and regulations as
the Secretary may from time to time prescribe. * * *
Section 1.6001-1(a), Income Tax Regs., provides that
any person subject to tax under subtitle A of the Code * * *
shall keep such permanent books of account or records * * *
as are sufficient to establish the amount of gross income,
deductions, credits, or other matters required to be shown
by such person in any return of such tax * * *
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