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respectively, for one-half of the self-employment tax due.
Respondent disallowed deductions in the amounts shown above
because they were not ordinary and necessary and were not
incurred in carrying on a trade or business. Further, respondent
determined that petitioner failed to maintain adequate records,
failed to substantiate the claimed deductions, and untimely filed
her returns. We agree with respondent.
E. Schedule C Expense Deductions
Deductions are a matter of legislative grace, and taxpayers
bear 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). A taxpayer is required to maintain records sufficient to
establish the amount of his or her income and deductions. See
sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs.
Section 162(a) allows a taxpayer to deduct all ordinary and
necessary business expenses paid or incurred during the taxable
year in carrying on any trade or business. To be “necessary” an
expense must be “appropriate and helpful” to the taxpayer’s
business. Welch v. Helvering, 290 U.S. 111, 113 (1933). To be
“ordinary” the transaction which gives rise to the expense must
be of a common or frequent occurrence in the type of business
involved. Deputy v. Du Pont, 308 U.S. 488, 495 (1940). No
deduction is allowed for personal, living, or family expenses.
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