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Deductions are a matter of legislative grace. See New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Petitioners bear the burden of proving that petitioner's tax home
was not in Los Angeles during 1994. See Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933); Daly v. Commissioner, 72
T.C. 190, 197 (1979), affd. 662 F.2d 253 (4th Cir. 1981). The
cost of goods purchased for resale in a taxpayer's business is an
offset to gross receipts in computing gross income. See Metra
Chem Corp. v. Commissioner, 88 T.C. 654, 661 (1987).
Petitioner's purported travel expenses are not cost of goods sold
but are expenses that would reduce petitioner's income, if at
all, as a deduction pursuant to section 162. Thus we shall
discuss the cost of goods sold and deductions together.
A taxpayer ordinarily may not deduct a personal expense.
See sec. 262. Section 162(a), however, allows a taxpayer to
deduct traveling expenses incurred while away from home. A
taxpayer may deduct a traveling expense under section 162(a)(2)
if the following three conditions are satisfied: (1) The expense
must be reasonable (e.g., lodging, transportation, fares, and
food); (2) it must be incurred while away from home; and (3) it
must be an ordinary and necessary expense incurred in the pursuit
of a trade or business. See Commissioner v. Flowers, 326 U.S.
5(...continued)
and 282 days during 1995 and 1996, respectively.
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