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During the trial, petitioners stated that they did not own
or operate a business during the years in issue and that they
were not self-employed during that period.
Deductions are a matter of legislative grace, and a taxpayer
bears the burden of proving that he has complied with the
specific requirements for any deduction he claims. Rule 142(a);
see INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Under section 162, a taxpayer may deduct all ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business. Sec. 162(a). Although the
term “trade or business” is not precisely defined in section 162
or the regulations promulgated thereunder, it is well established
that in order for an activity to be considered a taxpayer's trade
or business for purposes relevant here, the activity must be
conducted “with continuity and regularity” and “the taxpayer's
primary purpose for engaging in the activity must be for income
or profit.” Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987).
On the basis of the record, we conclude that Mr. Evan was
not in the trade or business of real estate during the years in
issue, as reported on the Schedules C. We base this conclusion
on petitioners’ testimony that they did not own a business and
were not self-employed during the years in issue, and on the
record which reflects that Mr. Evan has been receiving long-term
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