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Respondent has since conceded that petitioner may also deduct as
itemized deductions mortgage interest of $24,503 for 1992 and
taxes of $5,834, $5,955, and $6,141 for 1990 through 1992,
respectively.
OPINION
Petitioner must prove that respondent's determinations
contained in the notices of deficiency are incorrect. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Petitioner
also must prove his entitlement to any deduction challenged by
respondent. New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934). Deductions are strictly a matter of legislative grace,
and petitioner must present to the Court sufficient evidence to
substantiate any deduction that is allowed by the Code. Sec.
6001; New Colonial Ice Co. v. Helvering, supra at 440.
With these basic principles in mind, we turn to the issues
at hand. We address those issues seriatim.
1. Self-Employment Income
Respondent determined through a bank deposits analysis that
petitioner had unexplained bank deposits in the amounts set forth
above. Respondent asserts that those unexplained deposits
constitute unreported income from petitioner’s backhoe work and
land-clearing services.
When a taxpayer such as petitioner fails to keep adequate
books and records, section 446(b) authorizes the Commissioner to
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