Ronnie O. and G. June Craft - Page 6

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         respondent contended that these expenses should be disallowed                
         altogether, or if allowed, should be subject to the 2-percent                
         limitation of section 67.  Furthermore, petitioner knew that the             
         issue of whether the expenses were properly deductible by him on             
         his individual tax return was before the Court, and he presented             
         evidence on that subject.  Therefore, the burden of proof remains            
         with petitioner on all issues in this case.                                  
         II.  Expenses Related to Craft-Barnett                                       
               A.  Corporate Expenses v. Individual Expenses                          
               The first issue is whether the expenses are properly                   
         deductible by petitioner or whether they are expenses of the                 
         corporation not deductible by petitioner.                                    
               Deductions are a matter of legislative grace; petitioners              
         have the burden of showing that they are entitled to any                     
         deduction claimed.  Rule 142(a); INDOPCO, Inc, v. Commissioner,              
         503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292               
         U.S. 435, 440 (1934).  The taxpayer is required to maintain                  
         records that are sufficient to enable the Commissioner to                    
         determine his 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 claimed               
         deduction.  See Hradesky v. Commissioner, 65 T.C. 87, 90 (1975),             
         affd. per curiam 540 F.2d 821 (5th Cir. 1976).                               








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