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to business property and the loss on the sale was a business
loss.
Mr. Strand prepared petitioner’s 1994 return. Petitioners
relied on Mr. Strand’s tax advice in the preparation of their
1994 return. Petitioners reported the $499.98 they received on
the sale of the Belair property, for 1-week’s early occupancy, on
Schedule E, Supplemental Income and Loss, of their 1994 return as
rental income from the Belair property. Petitioners also
reported a $35,428 loss on the sale of the Belair property on
Form 4797, Sales of Business Property, which they attached to
their 1994 return. Petitioners filed their 1994 joint Federal
income tax return on December 8, 1997.
Discussion
I. Loss on Sale of the Belair Property
Deductions are a matter of legislative grace, and
petitioners have the burden of showing that they are entitled to
any deduction claimed. Rule 142(a); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934).5
Section 165(c) limits the deduction for losses pursuant to
section 165(a) by individuals to:
(1) losses incurred in a trade or business;
5 Cf. sec. 7491(a), effective for court proceedings arising
in connection with examinations commencing after July 22, 1998.
Petitioners do not contend that their examination began after
July 22, 1998, or that sec. 7491(a) is applicable to their case.
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