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Discussion
Petitioners bear the burden of proving their entitlement to
the claimed deductions. Rule 142(a); INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992); Rockwell v. Commissioner,
512 F.2d 882, 886 (9th Cir. 1975), affg. T.C. Memo. 1972-133.
"[A] taxpayer seeking a deduction must be able to point to an
applicable statute and show that * * * [the taxpayer] comes
within its terms." New Colonial Ice Co. v. Helvering, 292 U.S.
435, 440 (1934).
Petitioners have advanced numerous arguments in support of
their position that the splitup resulted in a deduction under
section 162 for insurance expenses. They have cited no authority
that supports their arguments. They have ignored the language
and fundamentals of section 162(a): "There shall be allowed as a
deduction all the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business." Emphasis added. The disputed deduction claimed by
petitioners does not include any payments that were made or
expenses accrued in the year ended January 26, 1990. The claimed
deduction did not arise out of new contracts entered during the
year ended January 26, 1990. Instead, petitioners ask us to
"deem" an insurance premium payment as a result of the section
355 splitup.
With respect to every item of expense that is claimed as a
deduction under section 162, a taxpayer must establish: (1) That
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