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Petitioners did not seek to enforce their security interests on
the 3513 and the 3532 properties.
Discussion
Deductions are a matter of legislative grace, and a taxpayer
generally bears the burden of proving that he or she is entitled
to the deductions claimed. See Rule 142(a); INDOPCO, Inc. v.
Commissioner, 503 U.S. 79 (1992); New Colonial Ice Co. v.
Helvering, 292 U.S. 435 (1934). The taxpayer is required to
maintain records that are sufficient to enable the Commissioner
to determine his or her correct tax liability. See sec. 6001;
sec. 1.6001-1(a), Income Tax Regs. In addition, the taxpayer
bears the burden of substantiating the amount and purpose of the
claimed deduction. See Hradesky v. Commissioner, 65 T.C. 87, 90
(1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).
Generally, the Commissioner’s determinations set forth in a
notice of deficiency are presumed correct, and the taxpayer bears
the burden of showing that the determinations are in error. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Pursuant
to section 7491,7 the burden of proof as to factual matters
shifts to the Commissioner under certain circumstances.
7 Sec. 7491 applies to court proceedings arising in
connection with examinations commencing after July 22, 1998.
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001(c), 112 Stat. 727. It appears that
the examination of petitioners’ 1997 tax return commenced after
the effective date of sec. 7491.
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