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7491(a)(2) with respect to the factual issues relevant to ascer-
taining petitioners’ tax liability for 1999 that remain in this
case. On that record, we conclude that petitioners’ burden of
proof on such issues, see Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933), does not shift to respondent under section
7491(a). Moreover, with respect to any deductions that petition-
ers are claiming for 1999, deductions are strictly a matter of
legislative grace, and petitioners bear the burden of proving
that they are entitled to any deductions claimed. INDOPCO, Inc.
v. Commissioner, 503 U.S. 79, 84 (1992).
It is now petitioners’ position that for 1999 they are
entitled under section 162(a) to deduct as advertising expenses
in Mr. Hopkins’s sole proprietorship’s Schedule C an unspecified
reasonable amount of Mr. Hopkins’s automobile racing expenditures
of $67,084.14 (For convenience, we shall sometimes refer to such
claimed deduction as Mr. Hopkins’s claimed Schedule C deduction
of $67,084.) It is also petitioners’ position that respondent’s
determination that for 1999 Mr. Hopkins’s S Corporation has
$26,885 of ordinary income that must be reported in petitioners’
Schedule E is wrong. That is because, according to petitioners,
14At trial, Mr. Hopkins conceded that during the first six
months of 1999, before Mr. Hopkins’s S Corporation was organized,
he made Mr. Hopkins’s automobile racing expenditures of $67,084.
We conclude that petitioners have conceded that they erroneously
included such automobile racing expenditures as part of the
nonpassive loss of $103,150 from Mr. Hopkins’s S Corporation
claimed in petitioners’ Schedule E.
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