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is determined not to rise to the level of fraud, respondent
asserts that petitioner is liable for the accuracy-related
penalty on account of negligence or disregard of rules or
regulations.
We agree with respondent that the substantiation offered by
petitioner not only falls short of establishing her entitlement
to the claimed deductions but also demonstrates sufficient
fraudulent intent to warrant the civil fraud penalty.
Disallowance of Deductions
As a general rule, respondent’s determinations are presumed
correct, and the taxpayer bears the burden of proving that such
determinations are erroneous. See Rule 142(a). Deductions,
moreover, are a matter of “legislative grace”, and “a taxpayer
seeking a deduction must be able to point to an applicable
statute and show that he comes within its terms.” New Colonial
Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). The burden of
proving entitlement to a deduction is therefore on the taxpayer,
see Rule 142(a), and every taxpayer is required to maintain
adequate records to substantiate the existence and amount of any
deduction claimed; see sec. 6001; sec. 1.6001-1(a), Income Tax
Regs.
Applying these principles to the matter at hand, we find
that petitioner here has failed to carry her burden of
establishing that disallowance of the challenged deductions was
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Last modified: May 25, 2011