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Respondent also determined that petitioner was liable for that
taxable year for the accuracy-related penalty under section
6662(a).
OPINION
Petitioner bears the burden of proving that the determina-
tions in the notice are erroneous. See Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933).
Claimed Royalty Expense Deduction
Petitioner contends that it is entitled under section 162(a)
to deduct for the year at issue the royalty expense claimed in
the Form 1120 that it filed for that year. Respondent counters
that petitioner has failed to establish that it satisfies the
requirements of section 162(a). Respondent also contends that
petitioner has failed to prove that it satisfies the all events
test with respect to the claimed royalty expense. See sec.
461(a) and (h). On the record before us, we agree with respon-
dent.
Section 162(a) allows a taxpayer to deduct all the ordinary
and necessary expenses that such taxpayer paid or incurred during
the taxable year in carrying on such taxpayer’s trade or busi-
ness. Deductions are strictly a matter of legislative grace, and
a taxpayer must meet the specific statutory requirements for any
deduction claimed. See INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992). The determination of whether an expenditure
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