Cynthia Pamela Aldridge Dumond and Jeffrey Allen Dumond - Page 5

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          7491 was applicable nor established that they complied with the             
          statutory substantiation requirements of section 7491(a), as                
          shown below.  Sec. 7491(a)(2)(A) and (B).                                   
          Business Expenses--Wages Paid to Children                                   
               Section 162(a)(1) provides that there shall be allowed as a            
          deduction all the ordinary and necessary expenses paid or                   
          incurred during the taxable year in carrying on a trade or                  
          business, including a reasonable allowance for salaries or other            
          compensation for personal services actually rendered.                       
               Section 1.162-7(a), Income Tax Regs. provides:  “The test of           
          deductibility in the case of compensation payments is whether               
          they are reasonable and are in fact payments purely for                     
          services.”  See Elec. & Neon, Inc. v. Commissioner, 56 T.C. 1324,           
          1340 (1971), affd. without published opinion 496 F.2d 876 (5th              
          Cir. 1974).  The question of whether amounts paid represent                 
          reasonable compensation for services is one of fact determined              
          from all the facts and circumstances of the case.  Charles                  
          Schneider & Co. v. Commissioner, 500 F.2d 148, 151 (8th Cir.                
          1974), affg. T.C. Memo. 1973-130; Home Interiors & Gifts, Inc. v.           
          Commissioner, 73 T.C. 1142, 1155 (1980).                                    
               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); New Colonial Ice Co. v.             
          Helvering, 292 U.S. 435, 440 (1934).  This includes the burden of           






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