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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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