Kenneth Lee and Margaret Ihlenfeldt - Page 7

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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,                  
               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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