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Petitioner wrote all checks to pay the expenses of
Arrowhead, and he determined the amounts of the salaries and
officer's compensation that it paid in 1989. Petitioner had
complete control over Arrowhead's records. Petitioner did not
produce any of Arrowhead's records at the time of trial, and he
did not produce any probative records to support his personal
income tax return.
Respondent determined, and reflected in the notice of
deficiency, that petitioner failed to report $66,851 of wages
that Arrowhead paid him. Petitioner's 1989 Form 1040 reported a
$16,101 deduction for mortgage interest. Respondent determined,
and reflected in the notice of deficiency, that petitioner paid
only $11,033 of mortgage interest in 1989.
OPINION
Petitioner must prove that respondent's determinations set
forth in the notice of deficiency are incorrect. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Petitioner also
must prove his entitlement to any deduction. Deductions are
strictly a matter of legislative grace, and petitioner must show
that his claimed deductions are allowed by the Code. Petitioner
must also keep sufficient records to substantiate any deduction
that would otherwise be allowed by the Code. Sec. 6001;
New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
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