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petitioner for $836,540. Petitioner also testified that she had
balance sheets for Topaz. Petitioner did not submit any
documents related to the calculation of her Topaz stock basis.
Petitioner has not provided evidence sufficient to establish
her Topaz stock basis. Therefore, petitioner has not established
that she is entitled to deduct the carryover loss on her 2000
Federal income tax return.
C. Itemized Deductions
Petitioner argues that she is entitled to deductions for
State income taxes and unreimbursed employee expenses.
Deductions are a matter of legislative grace, and petitioner
bears the burden of proving that 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). Taxpayers are required to
maintain records that are sufficient to enable the Commissioner
to determine their 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 item
for the claimed deduction. See Hradesky v. Commissioner, 65 T.C.
87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).
1. State Income Taxes
Petitioner claimed a $15,749 deduction for State income
taxes paid during 2000. Section 164(a)(3) provides, inter alia,
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