Thomas W. Burton - Page 4




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               Petitioner is an attorney practicing in the areas of                   
          business law, trusts, estates, and technology.  He was admitted             
          to the California State Bar in 1973.  Petitioner operated a law             
          practice with one office in San Diego and one in Orange County.             
          On his Schedule C for 1995, petitioner reported $144,787 in gross           
          income from his law practice and deducted expenses of $83,466.              
               Respondent disallowed $30,279 of petitioner’s Schedule C               
          deductions because petitioner did not substantiate these                    
          deductions.  The amount disallowed consists of $4,633 for meals             
          and entertainment, $6,533 for travel, and $19,113 for interest.             
          At trial respondent asserted that the meals and entertainment and           
          travel expense deductions were disallowed because petitioner                
          allegedly did not maintain a contemporaneous business record                
          showing a business purpose and because he deducted in 1995 some             
          expenses charged on a credit card in 1994 but paid in 1995.                 
               Deductions are strictly a matter of legislative grace.                 
          INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New                  
          Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).                    
          Taxpayers must substantiate claimed deductions.  Hradesky v.                
          Commissioner, 65 T.C. 87, 89 (1975), affd. per curiam 540 F.2d              
          821 (5th Cir. 1976).  Section 7491 does not change the burden of            
          proof where a taxpayer has failed to substantiate deductions.               
          Higbee v. Commissioner, 116 T.C. 438 (2001).  Moreover, taxpayers           
          must keep sufficient records to establish the amounts of the                
          deductions.  Meneguzzo v. Commissioner, 43 T.C. 824, 831 (1965);            





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