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have not made a prima facie case sufficient to shift the burden
to respondent under section 7491(a).
With respect to the delinquency addition to tax, the
Commissioner satisfies the section 7491(c) burden of production
by “[coming] forward with sufficient evidence indicating that it
is appropriate to impose the relevant penalty” but “need not
introduce evidence regarding reasonable cause, substantial
authority, or similar provisions.” Higbee v. Commissioner, supra
at 446. Rather, “it is the taxpayer’s responsibility to raise
those issues.” Id. Because, as will be more fully detailed
infra, respondent here has by stipulation introduced sufficient
evidence to render the section 6651(a)(1) addition at least
facially applicable, the burden rests on petitioners to show an
exception thereto.
II. Schedule C Loss
A. General Rules
Deductions are a matter of “legislative grace”, and “a
taxpayer seeking a deduction must be able to point to an
applicable statute and show that he comes within its terms.” New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); see also
Rule 142(a). As a general rule, section 162(a) authorizes a
deduction for “all the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business”. An expense is ordinary for purposes of this section
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Last modified: May 25, 2011