- 18 - Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions are a matter of legislative grace, and the taxpayer generally bears the burden of proving entitlement to such claimed deductions. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Furthermore, a taxpayer is required to maintain records sufficient to establish the amount of his income and deductions. Secs. 274(d), 6001; sec. 1.6001-1(a), (e), Income Tax Regs. A. Section 174--Research and Development Deductions With regard to the claimed research and development (R&D) expenses for 1995 and 1996, the notice of deficiency states: Schedule C - DMS Loss Year 9512 9612 Claimed on return $67,534 $1,421,645 Allowed per audit -0- -0- Adjustment 67,534 1,421,645 You have not shown that these expenses were ordinary and necessary expenses paid or incurred in connection with carrying on a trade of business. Since you have not established that the expenses claimed were paid or incurred for research and experimental expenditures in connection with your trade or business, they are not deductible. Loss is limited to amount of capital you have at risk. 13(...continued) the returns at issue commenced before the statute’s effective date.Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Next
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