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At trial, petitioner made the following concessions: (1)
For 1997, the miscellaneous itemized deduction claimed for car
and truck expenses incurred by petitioner as an employee of CSR
is overstated to the extent that petitioners failed to take into
account mileage reimbursements paid to petitioner by CSR
(according to the stipulation of facts, the deduction, if
otherwise allowable, is limited to $4,383.30); and (2) for 1997
and 1998, petitioner concedes that petitioners are not entitled
to the deductions claimed on the Schedules C.
All of the issues in this case arise from the disallowance
of deductions claimed on petitioners’ Federal income tax returns.
As has been noted in countless cases, deductions are a matter of
legislative grace and are allowed only as specifically provided
by statute. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84
(1992); Interstate Transit Lines v. Commissioner, 319 U.S. 590,
593 (1943); Deputy v. du Pont, 308 U.S. 488, 493 (1940); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). With
the exception of the discussion relating to the section 6662(a)
penalty, this fundamental principle of Federal income taxation
informs our analysis and resolution of each of the disputed
issues in this case as set forth below.2
2 Respondent bears the burden of production with respect to
the imposition of the sec. 6662(a) penalty for each year in
issue. Sec. 7491(c). Otherwise, under the circumstances,
petitioner bears the burden of proof on all issues in this case.
Sec. 7491(a); Rule 142(a).
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