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deducted $59,323 in total expenses from $82,528 of gross receipts
for a net profit of $23,205. On her first Schedule C, petitioner
described MBS as an accounting, bookkeeping, and income tax
business. On her second Schedule C for “A Joyful Wedding”, which
was described as minister services, petitioner deducted $12,871
of total expenses from $13,600 of gross receipts for a net profit
of $729.
Respondent disallowed $59,323 of deductions for the first
Schedule C and $12,871 for the second Schedule C because
petitioner did not establish that the business expenses shown on
her return were paid or incurred during the taxable year and that
the expenses were ordinary and necessary to her businesses. At
trial, respondent conceded that petitioner was engaged in two
businesses. Respondent in the notice of deficiency determined
that the $9,240 amount reported as other income for notary public
services was gross receipts of MBS and was subject to self-
employment tax. The notice of deficiency attributed another
$3,600 of income to gross receipts of MBS, but respondent
conceded this amount at trial.
Deductions are strictly a matter of legislative grace.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Taxpayers must substantiate claimed deductions. Hradesky v.
Commissioner, 65 T.C. 87, 89 (1975), affd. per curiam 540 F.2d
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