- 3 -
165(h),5 the casualty loss deduction equaled $38,829.
After examining the return, respondent determined that
petitioners’ deductions were overstated by $41,056, resulting in
a deficiency of $10,048. In the notice of deficiency, respondent
disallowed $5,704 of the $10,530 in medical and dental expenses
claimed by petitioners on the ground that petitioners had failed
to substantiate such amounts.6 Respondent also disallowed the
casualty loss deduction because petitioners had failed to show
that they had suffered a deductible loss in 1996 under section
165.
OPINION
Medical and Dental Expense Deduction
Deductions are strictly a matter of legislative grace, and
taxpayers bear the burden of proving that they are entitled to
any deductions claimed on their return. See Rule 142(a);
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). Taxpayers
must substantiate amounts claimed as deductions by maintaining
the records necessary to establish such entitlement. See sec.
5 Sec. 165(h) states in part that “Any loss * * * shall be
allowed only to the extent that the amount of the loss to such
individual arising from each casualty * * * exceeds $100" and
only to the extent that the net casualty loss “exceeds 10 percent
of the adjusted gross income”.
6 The remaining $4,826 in medical and dental expenses no
longer exceeds the 7.5-percent threshold limitation under sec.
213. Therefore, after respondent’s adjustments, petitioners
cannot deduct any of the remaining medical and dental expenses.
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