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$8,500 was not income to SCC. The second is a deposit of $8,500
on August 16, 1994, which Mr. Strong claims was payment for the
sale of his truck to his brother. In this instance, SCC has not
carried its burden. Mr. Strong provided testimony from his
brother that the $8,500 deposit was payment for a pickup truck.
However, this testimony is inconsistent with the records of the
Minnesota Department of Motor Vehicles regarding the ownership of
the truck in question, and we find this testimony unconvincing.
SCC does not provide any explanation for the remaining deposits,
and we conclude that these deposits are income to SCC.
C. Allowable Expenses of SCC
Section 162(a) allows a taxpayer deductions for ordinary and
necessary business expenses incurred during the taxable year in
carrying on a trade or business. Deductions, however, are a
matter of legislative grace, and the taxpayer bears the burden of
proving entitlement to any deduction claimed. See INDOPCO, Inc.
v. Commissioner, 503 U.S. 79, 84 (1992). Generally, a taxpayer
must establish that deductions taken pursuant to section 162 are
ordinary and necessary business expenses and must maintain
records sufficient to substantiate the amounts of the deductions
claimed. Sec. 1.6001-1(a), Income Tax Regs.
With respect to certain business expenses specified in
section 274(d), more stringent substantiation requirements apply.
Section 274(d) disallows deductions for travel expenses, gifts,
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