Craig D. Hollingsworth - Page 5




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         Individual Income Tax Return.  This form served to extend by 4               
         months the time within which petitioner was obliged to file his              
         1998 income tax return.                                                      
              B.  Examination of Petitioner’s 1998 Income Tax Return                  
              In due course, petitioner’s 1998 income tax return was                  
         selected for examination.  The focus of the examination was the              
         deductions claimed by petitioner on his Schedule C.  However,                
         petitioner “declined to open [his] books and records” or                     
         otherwise provide substantiation for any of the deductions in                
         question.  Thereafter, respondent disallowed petitioner’s                    
         Schedule C deductions for lack of substantiation.  Respondent                
         also determined that petitioner failed to timely file his 1998               
         return.                                                                      
         Discussion                                                                   
              A.  Petitioner’s Schedule C Deductions                                  
              We begin with several fundamental principles that serve to              
         guide the decisional process.                                                
              First, deductions are a matter of legislative grace.  Deputy            
         v. duPont, 308 U.S. 488, 493 (1940); New Colonial Ice Co. v.                 
         Helvering, 292 U.S. 435, 440 (1934).                                         
              Second, a taxpayer bears the burden of proving that the                 
         taxpayer is entitled to any deduction claimed.  Rule 142(a);                 
         INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v.              








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