Verta Hill - Page 9

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          tax if the examination of the taxpayer’s records for the subject            
          year began after July 22, 1998, and the taxpayer maintained                 
          adequate records, satisfied the substantiation requirements,                
          cooperated with the Commissioner, and introduced during the Court           
          proceeding credible evidence with respect to the factual issue.             
          In the present case, the burden does not shift with respect to              
          any factual issue relating to petitioner’s liability for the                
          income tax deficiency because petitioner neither alleged that               
          section 7491 was applicable nor established that she complied               
          with the substantiation requirements of section 7491(a), as shown           
          below.  Sec. 7491(a)(2)(A) and (B).                                         
               Deductions are a matter of legislative grace and are allowed           
          only as specifically provided by statute, and petitioner bears              
          the burden of proving that she is entitled to the claimed                   
          deduction.  INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84                  
          (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440                
          (1934).  With these well-established propositions in mind, we               
          must determine whether petitioner has satisfied her burden of               
          proving that she is entitled to a casualty loss deduction                   
          allegedly incurred during taxable year 2001.  Respondent argues             
          that petitioner has failed to produce any credible evidence to              
          substantiate her claimed loss, including the occurrence of any              
          casualty, or, if a casualty occurred, the amount deductible.                







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