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made during 1994 and 1995 with respect to the Paradise Lane
property. Respondent disputes that contention.
Deductions are strictly a matter of legislative grace, and
petitioners bear the burden of proving that they are entitled to
the deductions claimed under section 212. See INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992). In the case of an in-
dividual, section 212 allows, inter alia, a deduction for all the
ordinary and necessary expenses paid or incurred during the
taxable year for the management, conservation, or maintenance of
property held for the production of income. See sec. 212(2).
The dispute between the parties is whether petitioners held
the Paradise Lane property during the years at issue for the
production of income within the meaning of section 212(2). On
the record before us, we find that petitioners have failed to
show that that property was held for the production of income
within the meaning of that section. We further find on that
record that petitioners have failed to establish that they are
entitled under section 212 to the deductions that they are
claiming for the years at issue.4
4Assuming arguendo that petitioners had established that the
Paradise Lane property was held for the production of income
during 1994 and 1995, on the record before us, we find that
petitioners have failed to show that certain of the expenditures
incurred during those years do not constitute capital expendi-
tures that may not be deducted in their entirety for those years.
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