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for 1998 and 1999 totaled $2,370 and $2,346, respectively.
Petitioner claimed mortgage interest deductions in these amounts
on her 1998 and 1999 Schedules C. Respondent disallowed these
amounts in full.
Discussion
Deductions are a matter of legislative grace, and the
taxpayer bears the burden of proving the entitlement to any
deductions claimed. See INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992). Taxpayers generally bear the burden of proving
that the Commissioner’s determinations are incorrect. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). The
resolution of the issues in this case does not depend on which
party has the burden of proof. The Court resolves these issues
on the preponderance of evidence in the record. Therefore
section 7491 does not apply here.
1. Product-Related Expenses
Section 162(a) allows a taxpayer deductions for ordinary and
necessary business expenses incurred during the taxable year in
carrying on a trade or business. Generally, a taxpayer must
establish that deductions taken pursuant to section 162 are
ordinary and necessary business expenses and must maintain
records sufficient to substantiate the amounts of the deductions
claimed. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.
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