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OPINION
We begin by noting that respondent's determinations are
presumed correct, and petitioners bear the burden of proving that
those determinations are erroneous. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). Moreover, deductions are a
matter of legislative grace, and petitioners bear the burden of
proving that they are entitled to any deductions claimed.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).
1. Petitioner's Professional Activities
(a) Characterization of Income
We first address the characterization of the income which
petitioner received during 1991. Petitioners acknowledge that
petitioner received gross wages from UConn during the taxable
year 1991 in the amount of $53,009. Petitioners, however,
contend that the fellowship proceeds remitted to UConn in the
amount of $27,600 should be allowed as an offset against gross
wages.
To support their position, petitioners argue that the
fellowship proceeds remitted to UConn were returned to petitioner
in the form of gross wages for the narrow purpose of allowing
petitioner to retain employment benefits. Accordingly,
petitioners maintain that UConn acted as a conduit with respect
to the remitted fellowship proceeds. Petitioners suggest that
petitioner's choice in "running the monies" through UConn should
not alter the character of the fellowship proceeds. Therefore,
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