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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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