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expenses recharacterized as charitable contributions or with
respect to the membership expense which was disallowed. These
issues are deemed conceded.
Taxpayers generally bear the burden of proving that the
Commissioner’s determination is incorrect. Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933). Section 7491 does not change the
burden of proof where a taxpayer has failed to substantiate
deductions. Higbee v. Commissioner, 116 T.C. 438 (2001).
Deductions are strictly a matter of legislative grace.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Taxpayers must substantiate claimed deductions. Hradesky v.
Commissioner, 65 T.C. 87, 89 (1975), affd. per curiam 540 F.2d
821 (5th Cir. 1976). Moreover, taxpayers must keep sufficient
records to establish the amounts of the deductions. Meneguzzo v.
Commissioner, 43 T.C. 824, 831 (1965); sec. 1.6001-1(a), Income
Tax Regs.
Section 162(a) allows a taxpayer to deduct all ordinary and
necessary business expenses paid or incurred during the taxable
year in carrying on any trade or business. If a taxpayer’s trade
or business is that of being an employee, section 162 deductions
are subject to the limitations of section 62(a)(1) and are
miscellaneous itemized deductions subject to the 2-percent floor.
Sec. 67; Alexander v. Commissioner, T.C. Memo. 1995-51, affd. 72
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