Clifford L. Brody and Barbara J. Declerk - Page 9

                                        - 8 -                                         
          determined that petitioners are not entitled to the Schedule C              
          deductions as a “Service: Incubator”.6  Respondent contends that            
          these expenses are allowable as deductions to KOA but not to                
          petitioners individually.  Petitioners contend otherwise and                
          further contend that they are entitled to an ordinary loss in               
          1999 under section 1244.                                                    
                                     Discussion                                       
               Deductions are a matter of legislative grace, and a taxpayer           
          generally bears the burden of proving that he or she is entitled            
          to the deductions claimed.  See Rule 142(a); INDOPCO, Inc. v.               
          Commissioner, 503 U.S. 79 (1992); New Colonial Ice Co. v.                   
          Helvering, 292 U.S. 435 (1934).  The taxpayer is required to                
          maintain records that are sufficient to enable the Commissioner             
          to determine his correct tax liability.  See sec. 6001; sec.                
          1.6001-1(a), Income Tax Regs.  In addition, the taxpayer bears              
          the burden of substantiating the amount and purpose of the                  
          claimed deduction.  See Hradesky v. Commissioner, 65 T.C. 87, 90            
          (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).                      





               5(...continued)                                                        
          petitioner DeClerk’s car depreciation expense of $1,150 and her             
          car expense of $559.                                                        
               6  As indicated earlier, petitioners concede that they are             
          not entitled to petitioner DeClerk’s Schedule C deduction of                
          $1,150.                                                                     





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