Wayne M. and Janet L. Johnson - Page 5

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               Respondent issued petitioners a notice of deficiency for               
          their 1994 tax year.  In the notice of deficiency, respondent               
          disallowed petitioners' claimed partnership loss carryover and              
          their charitable contribution deduction.  Respondent adjusted               
          petitioners' claimed medical expense deduction and earned income            
          credit due to the increases in petitioners' adjusted gross                  
          income.  Respondent determined that petitioners were liable for             
          the self-employment tax and for the accuracy-related penalty.               
          Respondent also determined that petitioners were entitled to a              
          self-employment tax credit.                                                 
               While no deficiency was determined for 1993, the statement             
          of adjustments attached to the notice of deficiency included                
          adjustments to petitioners' 1993 Federal income tax return.  The            
          adjustments for 1993 consisted of the disallowance of                       
          petitioners' claimed partnership loss carryover from 1992,                  
          charitable contribution deduction, and medical expense deduction.           
          Respondent also made an adjustment to petitioners' claimed earned           
          income credit for 1993 as a result of the adjustment to                     
          petitioners' adjusted gross income.                                         
               We begin by noting that the Commissioner's determinations              
          are presumed correct.  See Rule 142(a); Welch v. Helvering, 290             
          U.S. 111, 115 (1933).  Deductions are a matter of legislative               
          grace, and the taxpayers bear the burden of proving that they are           

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