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On his 2001 Federal income tax return, petitioner reported a
net business loss of $40,668. On Schedule C of his 2001 Federal
income tax return, petitioner reported gross receipts of $20,398
and deducted the following expenses:
Expense Amount
Car and truck $56,100
Repairs and maintenance 2,000
Supplies 520
Cell phone 1,200
Uniforms 546
Furniture 150
Computer 550
Total $61,066
In the notice of deficiency, respondent disallowed all but $8,145
of the claimed deductions.2 Petitioner bears the burden of proof
in showing whether he is entitled to deductions in excess of what
respondent allowed.3
In general, deductions are a matter of legislative grace.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). Taxpayers
2Petitioner was allowed car and truck expenses of $5,973,
cellular phone expenses of $708, and “other amounts” deducted
from petitioner’s paycheck by Pillow Express of $1,464.
3Because of the year involved, the examination of
petitioner’s return at issue commenced after July 22, 1998.
Therefore, sec. 7491, which under certain circumstances shifts
the burden of proof to the Commissioner, applies. However, for
the burden to be placed on the Commissioner, the taxpayer must
comply with the substantiation and record-keeping requirements of
the Internal Revenue Code. Sec. 7491(a)(2)(A) and (B). On this
record, petitioner has not wholly satisfied that requirement;
therefore, the burden has not shifted to respondent under sec.
7491. Higbee v. Commissioner, 116 T.C. 438 (2001).
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Last modified: May 25, 2011