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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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