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carry forward of a capital loss resulting from the 1990 write-off
by petitioner wife of petitioner husband's alleged indebtedness
to her.
The first issue for decision is whether petitioners are
entitled to claim trade or business deductions on their 1991 and
1992 returns for expenses allegedly incurred in their research
activities. In the notice of deficiency, respondent disallowed
the claimed Schedule C deductions upon the grounds that
petitioners' research activities were not engaged in for profit,
and that, with the exception of certain expenses for interest and
taxes, petitioners failed to substantiate the claimed deductions.
Respondent's determinations are presumed to be correct, and
petitioners bear the burden of proving otherwise. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Furthermore,
deductions are strictly a matter of legislative grace, and
petitioners must demonstrate their entitlement to any deductions
claimed. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435,
440 (1934). This includes the requirement that petitioners
substantiate any deductions claimed. Hradesky v. Commissioner,
65 T.C. 87 (1975), affd. 540 F.2d 821 (5th Cir. 1976).
Section 162(a) allows a taxpayer to deduct the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business. Whether an activity
constitutes the taxpayer's trade or business within the meaning
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