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of petitioner's claimed expenses, and he also disallowed $1,002
of cost of goods sold for 1995 due to lack of substantiation.
Discussion
1. Schedule C Expenses
Deductions are a matter of legislative grace, and a taxpayer
seeking a deduction must establish his entitlement to the
deduction claimed. See New Colonial Ice Co. v. Helvering, 292
U.S. 435, 440 (1934).
Section 162(a) generally provides that there shall be
allowed as a deduction all the ordinary and necessary expenses
paid or incurred during the taxable year in carrying on a trade
or business. To be entitled to a deduction under section 162(a),
a taxpayer is required to substantiate the deduction through the
maintenance of books and records. Section 6001 requires
generally that a taxpayer liable for any tax shall maintain such
records, render such statements, make such returns, and comply
with such regulations as the Secretary may from time to time
prescribe.
While petitioner testified that he incurred certain
expenses, he concluded that he incurred a loss in his business in
the amount of $355. The record shows the transaction from which
the loss originated took place in 1996. The loss is not properly
deductible in 1994 or 1995.
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