Chickie's and Pete's, Inc. - Page 10

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          $90,000.                                                                    
               Petitioner filed Form 1120, U.S. Corporation Income Tax                
          Return, for the year at issue.  In that return, petitioner, inter           
          alia, claimed a deduction of $902,476 for the payment under                 
          petitioner’s license agreement.                                             
               Respondent issued a notice of deficiency (notice) to peti-             
          tioner.  In the notice, respondent determined to disallow the               
          deduction of $902,476 that petitioner claimed for the payment               
          under petitioner’s license agreement.                                       
                                       OPINION                                        
               Although respondent must have commenced respondent’s exami-            
          nation of petitioner’s return for the year at issue after July              
          22, 1998, the parties do not address section 7491(a).5  On the              
          record before us, we find that petitioner has failed to carry its           
          burden of establishing that it satisfied the applicable require-            
          ments of section 7491(a)(2).  On that record, we conclude that              
          petitioner’s burden of proof, see Rule 142(a); Welch v.                     
          Helvering, 290 U.S. 111, 115 (1933), does not shift to respondent           
          under section 7491(a).  Moreover, with respect to the deduction             
          that petitioner is claiming for the year at issue, deductions are           
          strictly a matter of legislative grace, and petitioner bears the            
          burden of proving that it is entitled to the deduction claimed.             

               5All section references are to the Internal Revenue Code in            
          effect for the year at issue.  All Rule references are to the Tax           
          Court Rules of Practice and Procedure.                                      





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