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sec. 3001(c), 112 Stat. 727. By virtue of section 7491(a), the
burden of proof may, under certain circumstances, be shifted to
the Commissioner.
In the present case, section 7491(a) does not operate to
place the burden of proof on respondent because: (1) Petitioner
did not allege, much less demonstrate, that section 7491 is
applicable; (2) petitioner did not introduce credible evidence
with respect to any factual issue relevant to ascertaining his
liability; (3) petitioner did not comply with the requirements
under the Internal Revenue Code to substantiate his deductions;
and (4) petitioner did not maintain all records required under
the Internal Revenue Code. See Higbee v. Commissioner, 116 T.C.
438 (2001). In addition, it is open to question whether
petitioner cooperated, within the meaning of section
7491(a)(2)(B), with respondent’s agents.
In view of the foregoing, we proceed with our analysis on
the basis that petitioner bears the burden of proving that
respondent’s deficiency determinations are erroneous.
B. Issue 1. Schedule C Deductions
1. General Principles
Deductions are a matter of legislative grace, and the
taxpayer bears the burden of proving that he or she is entitled
to any deduction claimed. Rule 142(a); Deputy v. du Pont, 308
U.S. 488, 493 (1940); New Colonial Ice Co. v. Helvering, 292 U.S.
435, 440 (1934); see INDOPCO, Inc. v. Commissioner, supra; Welch
v. Helvering, supra. This includes the burden of substantiation.
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