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Discussion
The Commissioner’s determinations are presumed correct, and
generally, the taxpayer bears the burden of proving otherwise.
Welch v. Helvering, 290 U.S. 111, 115 (1933). Moreover,
deductions are a matter of legislative grace, and the taxpayer
bears the burden of proving that he or she is entitled to any
deduction claimed. New Colonial Ice Co. v. Helvering, 292 U.S.
435, 440 (1934); Welch v. Helvering, supra. This includes the
burden of substantiation. Hradesky v. Commissioner, 65 T.C. 87,
90 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).
The burden of proof may shift to the Commissioner under
section 7491(a). Because petitioner failed to comply with the
requirements of section 7491(a)(2), however, section 7491 is
inapplicable. Under section 7491(c), respondent has the burden
of production with respect to petitioner’s liability for the
accuracy-related penalty.
Petitioner’s Deductions
Section 162(a) authorizes a deduction for all ordinary and
necessary expenses paid or incurred during a taxable year in
carrying on a trade or business. An “ordinary” expense is one
that relates to a transaction “of common or frequent occurrence
in the type of business involved”, Deputy v. du Pont, 308 U.S.
488, 495 (1940), and a “necessary” expense is one that is
“appropriate and helpful” for “the development of the
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