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Regs. Deductions are a matter of legislative grace, and
taxpayers bear the burden of proving that they are entitled to
any deductions claimed. See Rule 142(a); INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934).
Respondent disallowed petitioners’ claimed deduction for
the $102,995 deposited by Boehm to Crestmark’s account on grounds
that petitioners have failed to establish that services were ever
performed by Crestmark. Respondent argues that the arrangement
with Crestmark was a sham intended to divert wage income to their
wholly owned corporation.3 Petitioners counter that “The record
has ample evidence to support the finding that the services were
in fact performed by Mr. Boehm in his capacity as an officer of
Crestmark.”
Petitioners have failed to establish that the amounts
ostensibly paid to Crestmark were reasonable or purely for
services that Boehm provided. Apart from petitioners’ self-
serving testimony, the only evidence that petitioners have
produced to support the claimed deduction is a single unsigned
and undated document, captioned “Invoice”, that states in its
3 Respondent has not raised, and therefore we do not
consider, any issue as to whether the amounts paid to Crestmark
represented ordinary and necessary expenses of carrying on
Mowrey’s business as a commission-basis employee for Forth Worth
Mortgage.
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Last modified: May 25, 2011