Saffet and Ana Uslu - Page 6

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          the Alisal property mortgage interest for the year 1992, nor did            
          they ever claim deductions on their tax returns for interest or             
          taxes attributable to this property.                                        
               The determinations of the Commissioner in a notice of                  
          deficiency are presumed correct, and the burden is on the                   
          taxpayer to prove that the determinations are in error.  Rule               
          142(a); Welch v. Helvering, 290 U.S. 111 (1933).  Moreover,                 
          deductions are a matter of legislative grace, and the taxpayer              
          bears the burden of proving entitlement to any claimed deduction,           
          and that such deduction fits squarely within the ambit of the               
          statute providing the deduction.  New Colonial Ice Co. v.                   
          Helvering, 292 U.S. 435 (1934).                                             
               Section 163(a) provides that there shall be allowed as a               
          deduction all interest paid or accrued within the taxable year on           
          indebtedness.  Section 163(h)(1), however, provides that, in the            
          case of a taxpayer other than a corporation, no deduction shall             
          be allowed for personal interest paid or accrued during the                 
          taxable year.  Section 163(h)(2) defines "personal interest" to             
          mean any interest allowable as a deduction other than, inter                
          alia, "any qualified residence interest".  Sec. 163(h)(2)(D).               
          Thus, qualified residence interest is deductible under section              
          163(a).  The term "qualified residence interest" is defined, in             
          pertinent part, in section 163(h)(3)(A)(i), as any interest paid            
          or accrued during the taxable year on "acquisition indebtedness             

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