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Respondent's determinations are presumed correct, and
petitioners bear the burden of proving otherwise. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions are a
matter of legislative grace, and taxpayers bear the burden of
proving that they are entitled to any deduction claimed. New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Taxpayers must substantiate the amount of any deductions claimed.
Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), affd. per
curiam 540 F.2d 821 (5th Cir. 1976). Taxpayers are required to
keep sufficient records to enable the Commissioner to determine
their correct tax liability. Sec. 6001.
Section 162 allows the deduction of ordinary and necessary
expenses incurred in carrying on any trade or business. Section
212 allows the deduction of ordinary and necessary expenses for
the production or collection of income or for the maintenance of
property held for the production of income. Petitioners failed
to substantiate their entitlement to deductions in an amount in
excess of that already allowed by respondent. They did not
produce records of Double D Ranch, Inc., such as journals,
13(...continued)
1984 1985 1986
Total income reported by $1,500 $0 $18,817
Double D Ranch, Inc.
Less:
Total interest paid (71,644) (69,590) (58,228)
Total real estate taxes paid (7,107) (5,493) (5,840)
Total loss allowed ($77,251) ($75,083) ($45,251)
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