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income. Consequently, we sustain respondent’s determination that
petitioners have unreported Schedule C gross receipts for 1995 in
the amount of $890,719.
Respondent’s Determination Regarding
Petitioners’ Claimed Depreciation Deductions
In the notice, respondent disallowed the depreciation
deductions that petitioners claimed in the 1995 Schedule C with
respect to petitioners’ two automobiles.
Deductions are strictly a matter of legislative grace, and
petitioners bear the burden of proving that they are entitled to
any deductions claimed. See INDOPCO, Inc. v. Commissioner, 503
U.S. 79, 84 (1992).
Section 167(a) allows a deduction for a reasonable allowance
for the exhaustion, wear and tear, and obsolescence of property
used in a trade or business or held for the production of income.
Section 274(d)(4) operates to disallow any deduction otherwise
allowable under, inter alia, section 167 with respect to, inter
alia, any “listed property” unless the taxpayer satisfies the
substantiation requirements of that section.39 “Listed property”
39Sec. 274(d) provides in pertinent part:
SEC. 274. DISALLOWANCE OF CERTAIN ENTERTAINMENT, ETC.,
EXPENSES.
(d) Substantiation Required.--No deduction or credit
shall be allowed--
* * * * * * *
(continued...)
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