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as of that date. Therefore, we find that the statute of
limitations period expired on April 18, 2000. We hold that the
statute of limitations does not bar assessment of the deficiency
determined in the statutory notice sent to petitioner on December
28, 1999.
We now address the remaining issues. Respondent disallowed
the deduction of $36,167 of Schedule C expenses. Petitioner
presented no testimony or other evidence regarding these
deductions. 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
821 (5th Cir. 1976). Section 7491(a) does not change the burden
of proof where petitioner has failed to substantiate her
deductions. Higbee v. Commissioner, 116 T.C. 438 (2001).
Moreover, taxpayers must keep sufficient records to establish the
amounts of the deductions. Meneguzzo v. Commissioner, 43 T.C.
824, 831 (1965); sec. 1.6001-1(a), Income Tax Regs. Because
petitioner presented no substantiation, we sustain respondent's
determination as to the disallowance of the deduction of $36,167
of Schedule C expenses.
Under section 7491(c), respondent has the burden of
production in any court proceeding with respect to the liability
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