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trade or business". Deductions are a matter of legislative
grace, and the taxpayer bears the burden of proving that he is
entitled to any deductions claimed. Rule 142(a); INDOPCO, Inc.
v. Commissioner, 503 U.S. 79, 84 (1992).
Taxpayers must substantiate any deductions claimed and bear
the burden of substantiation. Hradesky v. Commissioner, 65 T.C.
87, 89-90 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).
Taxpayers are required to maintain adequate records sufficient to
enable the Commissioner to determine the taxpayer's correct tax
liability. Sec. 6001; Meneguzzo v. Commissioner, 43 T.C. 824,
831-832 (1965); sec. 1.6001-1(a), Income Tax Regs.
A taxpayer's inability to produce records does not relieve
the taxpayer of the burden of proof. See Estate of Mason v.
Commissioner, 64 T.C. 651 (1975), affd. 566 F.2d 2 (6th Cir.
1977).
At trial, petitioners submitted transaction reports prepared
for petitioners by Mr. Tijerina's firm for the 1994 and 1995 tax
years. Petitioners also submitted bank records for a 1-year
period beginning on December 31, 1994, and ending on December 7,
1995. Mr. Tijerina's firm used the 1994 transaction report to
prepare petitioners' 1994 Federal income tax return. As
previously stated, canceled checks which could have substantiated
petitioners' 1994 and 1995 business expenses were lost by Mr.
Tijerina's firm when that firm moved offices.
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