Sarah A. Bland-Barclay and Francis Barclay - Page 7

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          As petitioners’ arguments have been addressed by this and other             
          courts, we need not exhaustively review and respond to them.                
          Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984).                       
               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).3               
          Section 162(a) allows a deduction for a taxpayer’s “ordinary and            
          necessary” business expenses paid or incurred during the taxable            
          year.  However, 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.             
               At trial, petitioner failed to offer any evidence with                 
          regard to the disallowed Schedules A and C deductions.  Her                 
          testimony consisted chiefly of describing the nature of her                 
          business activities during the year.  Petitioners failed to                 
          substantiate any of the disallowed Schedules A and C deductions.            
          Based on the record, we find no credible basis for allowing any             
          deduction in excess of amounts previously allowed by respondent.            
               The last issue for decision is whether petitioners are                 
          liable for an accuracy-related penalty pursuant to section                  
          6662(a) for the year in issue.  Section 6662(a) imposes a penalty           

          3    Respondent does not bear any burden of proof or production             
          under sec. 7491 because the examination commenced prior to July             
          22, 1998.                                                                   

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