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petitioner was not entitled to the Schedule C car and truck
expense deduction because petitioner failed to substantiate the
actual expenses claimed, and, instead, petitioner was allowed a
deduction based on standard mileage. Therefore, respondent
disallowed the depreciation deduction for petitioner’s Lexus and
further disallowed a portion of the depreciation deduction
claimed for his computers for failure to substantiate the amounts
claimed. In the petition, petitioner raised a new issue that the
amount of gross receipts reported on his Schedule C was
overstated.
Deductions are a matter of legislative grace, and the
taxpayer bears 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).4
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
4 Upon reviewing the record, it is unclear when the audit of
petitioner’s 1996 return commenced. However, since sec. 7491(a)
does not alter the taxpayer’s burden of proof where the taxpayer
has not complied with all applicable substantiation requirements,
including those of sec. 274(d), sec. 7491(a) does not apply in
this case. Higbee v. Commissioner, 116 T.C. 438, 442 (2001).
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Last modified: May 25, 2011