Umit Tarakci - Page 16




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          the regulations under section 469 applies to petitioner.                    
               The passive loss limitations of section 469 still apply to             
          petitioner unless the material participation standard is met.               
          See sec. 469(c)(1); Welch v. Commissioner, supra.  A taxpayer is            
          treated as materially participating in an activity only if the              
          taxpayer is involved in the activity on a basis which is regular,           
          continuous, and substantial.  See sec. 469(h)(1).  Petitioner               
          conducted the equipment leasing activity through his sole                   
          proprietorship and personally purchased equipment, used materials           
          to construct equipment for use in the operations of the                     
          partnership, maintained business expense records, and conducted             
          transactions relating to the leasing activity.  Based on all the            
          facts and circumstances, we hold that petitioner was involved in            
          the leasing activity on a basis that was regular, continuous, and           
          substantial.  See sec. 1.469-5T(a)(7), Temporary Income Tax                 
          Regs., 53 Fed. Reg. 5726 (Feb. 25, 1988).                                   
          III. Entitlement and Substantiation of Claimed Deductions                   
               Deductions are a matter of legislative grace, and the                  
          taxpayer bears the burden of proving the entitlement to any                 
          deduction claimed.  See INDOPCO, Inc. v. Commissioner, 503 U.S.             
          79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435,             
          440 (1934).10  Taxpayers must substantiate any deductions                   


               10Sec. 7491, as effective for court proceedings arising in             
          connection with examinations after July 22, 1998, shifts the                
                                                             (continued...)           





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