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one year to the next in order to increase the likelihood for
profit. Petitioner never had her dogs appraised, and she did not
insure them.
Relevant for our purposes, in the notice of deficiency,
respondent disallowed the net loss reported on the Schedule C.
Respondent explained the disallowance as follows: "It is
determined that the Schedule C loss pertaining to your dog
operations was not incurred in transactions entered into for
profit. Therefore, the loss of $28,617.00 shown on your return
is not allowable."
OPINION
Deductions are a matter of legislative grace. A taxpayer
who claims a deduction must identify the specific statute that
allows for the type of deduction claimed and demonstrate that all
of the requirements of the statute have been satisfied.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Although not expressly referred to by petitioner, it is clear
that in this case petitioner relies upon section 162(a) in
support of the deductions here in dispute.
In general, section 162(a) allows a deduction for all
ordinary and necessary expenses paid or incurred during the
taxable year in carrying on a trade or business. The term "trade
or business" is not precisely defined in the Internal Revenue
Code or the regulations promulgated thereunder; however, it is
well established that in order for an activity to be considered a
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