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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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