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for trial: (1) Inventory markup percentage for 1992; (2) the
amount of inventory unsold at the end of 1992; and (3) gross
income for 1992. In view of petitioners' actions, we find that
the issues were tried with their implied consent.
Accordingly, we will grant respondent's motion to amend his
answer to conform to the evidence so as to assert an increased
deficiency and penalty for 1992. Respondent has the burden of
proving, however, that petitioners are liable for the increased
deficiency and penalty. Rule 142(a).
Issue 1. Rental Expenses
Deductions are matters of legislative grace, and "only as
there is clear provision therefor can any particular deduction be
allowed." New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934).
Section 162(a) provides in part that
SEC. 162(a). In General.--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, including--
* * * * * * *
(3) rentals or other payments required to be made
as a condition to the continued use or possession, for
purposes of the trade or business, of property to which
the taxpayer has not taken or is not taking title or in
which he has no equity.
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