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1990 50,812 Schedule C - Cost of Goods Sold - paid to
Charles Hoerl ($42,812) and James Eckelt
($8,000)1
1991 30,837 Schedule C - Cost of Goods Sold - paid to
Charles Hoerl
1991 1,500 Schedule C - Construction Expense - paid to
subcontractor Gary Keener
1992 40,880 Schedule C - Cost of Goods Sold -paid to
subcontractors
1 The parties stipulated that James Eckelt denied
receiving $8,000 from petitioner during 1990.
Joseph Sweeney, Charles Hoerl, James Eckelt, and Gary Keener were
not called as witnesses and did not testify at trial.
Respondent disallowed deductions and cost of goods sold in
the amounts shown above because petitioner failed to maintain
adequate records to substantiate the claimed amounts.
Deductions are a matter of legislative grace, and taxpayers
bear the burden of proving the entitlement to any deduction
claimed. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992);
New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). A
taxpayer is required to maintain records sufficient to establish
the amount of his or her income and deductions. Sec. 6001; sec.
1.6001-1(a), (e), Income Tax Regs.
Section 162(a) allows a taxpayer to deduct all ordinary and
necessary business expenses paid or incurred during the taxable
year in carrying on any trade or business. To be “necessary” an
expense must be “appropriate and helpful” to the taxpayer’s
business. Welch v. Helvering, 290 U.S. 111, 113 (1933). To be
“ordinary” the transaction which gives rise to the expense must
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Last modified: May 25, 2011