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that demonstrated that the expenses were incurred but not that
the expenses had a business purpose. Petitioner’s return also
showed a rent expense deduction for 1999 related to GTG; however
petitioner presented no evidence related to this expense.
D. Penalties
The parties stipulated that petitioner was delinquent in
filing his tax returns for 1998, 1999, and 2000. Petitioner
filed his 1998 tax return on June 21, 2000; his 1999 tax return
on February 28, 2001; and his 2000 tax return no earlier than
April 14, 2002.
Discussion
I. Burden of Proof and Production
Deductions are a matter of legislative grace; taxpayers do
not have an inherent right to claim them. Taxpayers
generally bear the burden of proving that they are entitled
to claimed deductions. See Rule 142(a); INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (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.
The Commissioner’s determinations set forth in a notice of
deficiency are generally presumed correct, and the taxpayer bears
the burden of proving that the determinations are in error. Rule
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