Herschel H. and Roberta S. Hoopengarner - Page 10

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                                       OPINION                                        
          A.   Petitioners Have Not Substantiated the Claimed NOLs                    
               Petitioners have not substantiated their claimed net                   
          operating losses.                                                           
               Taxpayers are required to maintain adequate records to                 
          substantiate claimed losses, and taxpayers bear the burden of               
          proving that they are entitled to claimed losses.  Sec. 6001;               
          Rule 142(a);2 Welch v. Helvering, 290 U.S. 111, 115 (1933).                 
               Petitioners, in deducting NOLs, bear the burden of                     
          establishing both the existence of the NOLs and the amount of any           
          NOL that may be carried over to the subject years.   United                 
          States v. Olympic Radio & Television, Inc., 349 U.S. 232, 235               
          (1955); Keith v. Commissioner, 115 T.C. 605, 621 (2000); Jones v.           
          Commissioner, 25 T.C. 1100, 1104 (1956), revd. and remanded on              
          other grounds 259 F.2d 300 (5th Cir. 1958).  Such a deduction is            
          a matter of legislative grace; it is not a matter of right.                 
          United States v. Olympic Radio & Television, Inc., supra at 235;            
          Deputy v. Du Pont, 308 U.S. 488, 493 (1940).                                
               Section 172 allows a taxpayer to deduct an NOL for a taxable           
          year.  The amount of the NOL deduction equals the sum of the NOL            
          carryovers plus NOL carrybacks to that year.  Sec. 172(a).                  
          Absent an election to the contrary, an NOL for any taxable year             

               2  The parties agree that sec. 7491(a) is inapplicable in              
          this case, as the examination began before the effective date of            
          the statute.                                                                





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