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the hotel; (2) the origin of the claim was not the purchase
agreement; and (3) acquisition costs are required to be
capitalized only when a new asset is acquired or the costs extend
the life or increase the value of the asset.
Deductions are a matter of legislative grace, and the
taxpayer bears the burden of proving the entitlement to any
deduction claimed.4 INDOPCO, Inc. v. Commissioner, 503 U.S. 79,
84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934). Section 162(a) allows a deduction for ordinary and
necessary business expenses paid or incurred during the taxable
year in connection with the carrying on of a trade or business.
Commissioner v. Lincoln Sav. & Loan Association, 403 U.S. 345,
352 (1971). Expenses incurred in defending a business and its
policies from attack are generally deductible as ordinary and
necessary business expenses. E.g., Commissioner v. Tellier, 383
U.S. 687 (1966); Commissioner v. Heininger, 320 U.S. 467 (1943);
Am. Stores Co. & Subs. v. Commissioner, 114 T.C. 458 (2000). On
the other hand, no current deduction is allowed for capital
4In certain circumstances, if the taxpayer introduces
credible evidence with respect to any factual issue relevant to
ascertaining the proper tax liability, sec. 7491 places the
burden of proof on the Secretary. Sec. 7491(a). Sec. 7491 is
effective with respect to court proceedings arising in connection
with examinations commencing after July 22, 1998. Internal
Revenue Service Restructuring and Reform Act of 1998, Pub. L.
105-206, sec. 3001(c), 112 Stat. 727. The examination in this
case commenced in January 1997; thus, sec. 7491 is not
applicable.
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