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claimed deductions before August 1999.
On this record, we conclude that respondent's position was
substantially justified. In the notice of deficiency, respondent
premised the adjustments primarily on petitioner's failure to
substantiate items on its returns. Taxpayers do not have an
inherent right to take tax deductions. Deductions are a matter
of legislative grace, and a taxpayer bears the burden of proving
entitlement to any deduction claimed. See Deputy v. du Pont, 308
U.S. 488, 493 (1940); New Colonial Ice Co. v. Helvering, 292 U.S.
435, 440 (1934). This includes the burden of substantiating the
amount and purpose of the item claimed. See sec. 6001; Hradesky
v. Commissioner, 65 T.C. 87, 89-90 (1975), affd. per curiam 540
F.2d 821 (5th Cir. 1976); sec. 1.6001-1(a), Income Tax Regs. We
find that "It was reasonable for respondent not to concede the
adjustments until * * * [he] had received and verified adequate
substantiation for the items in question." Simpson Fin. Servs.,
Inc. v. Commissioner, T.C. Memo. 1996-317 (citing Harrison v.
Commissioner, 854 F.2d 263, 265 (7th Cir. 1988), affg. T.C. Memo.
1987-52; Sokol v. Commissioner, supra at 765).
Petitioner argues that the Commissioner mishandled this
case, and that if it had been administered properly, petitioner
would have incurred much less expense. Petitioner states that
the Appeals officer raised issues that were not in the revenue
agent's examination report, and that it was denied the
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