- 16 -
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...)
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 NextLast modified: May 25, 2011