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that petitioner failed to report income for its fiscal year ended
May 31, 1995, in the amount of $120,371.
Discussion
We are asked to decide (1) whether petitioner may deduct
from its gross sales for the taxable year ended May 31,1995,
“double-ups” in the amount of $120,371 and (2) whether petitioner
is liable for an accuracy-related penalty pursuant to the
provisions of section 6662(a) in the amount of $6,089.40.
Deductions are a matter of legislative grace, and a taxpayer
bears the burden of proving that it is entitled to any deduction
claimed.1 Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992); Deputy v. du Pont, 308 U.S. 488 (1940); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Section 6001 requires all taxpayers to maintain sufficient
records to determine their tax liabilities. When a taxpayer
fails to maintain adequate books and records, respondent is
entitled to reconstruct the taxpayer’s income by any reasonable
method. Holland v. United States, 348 U.S. 121 (1954); Ferenc v.
Commissioner, T.C. Memo. 1991-617, affd. without published
opinion 9 F.3d 120 (11th Cir. 1993); sec. 1.6001-1(a), Income Tax
Regs.
1 Because the examination of petitioner began prior to
July 22, 1998, sec. 7491 burden of proof and production
provisions do not apply. See sec. 7491.
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