- 10 - Assoc.), but no one from that accounting firm replied to petitioner’s inquiry. OPINION As a general rule, the determinations by the Commissioner in a notice of deficiency are presumed correct, and the burden is on the taxpayer to show that the Commissioner’s determinations are incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).3 Deductions are a matter of legislative grace; the taxpayer bears the burden of proving entitlement to all deductions claimed. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). I. Schedule C--Adjustments A business’s income is computed by taking into account its cost of goods sold as well as a variety of expenses. Cost of goods sold reduces (i.e., is subtracted from) gross receipts in determining the business’s gross income. Sec. 1.61-3(a), Income Tax Regs. Cost of goods sold is not treated as a deduction from gross income and is not subject to the limitations on deductions contained in sections 162 and 274. Metra Chem Corp. v. Commissioner, 88 T.C. 654, 661 (1987). All amounts claimed as 3 Pursuant to sec. 7491, the burden of proof or of production may be placed on the Commissioner in certain circumstances for audits conducted after July 22, 1998. Sec. 7491 is inapplicable in this case because petitioners’ examination commenced before July 22, 1998.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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