- 7 -
T.C. 143, 168 (2004) (quoting Higbee v. Commissioner, 116 T.C.
438, 442 (2001)). Section 7491(a)(1) applies only if the
taxpayer complies with substantiation requirements, maintains all
required records, and cooperates with reasonable requests by the
Commissioner for witnesses, information, documents, meetings, and
interviews. Sec. 7491(a)(2). Although neither party alleges the
applicability of section 7491(a), we conclude that the burden of
proof has not shifted to respondent with respect to any of the
issues in the present case.
Moreover, deductions are a matter of legislative grace and
are allowed only as specifically provided by statute. INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice
Co. v. Helvering, 292 U.S. 435, 440 (1934).
Section 6001 and the regulations promulgated thereunder
require taxpayers to maintain records sufficient to permit
verification of income and expenses. As a general rule, if the
trial record provides sufficient evidence that the taxpayer has
incurred a deductible expense, but the taxpayer is unable to
adequately substantiate the precise amount of the deduction to
which he or she is otherwise entitled, the Court may estimate the
amount of the deductible expense, bearing heavily against the
1(...continued)
evidence the Court would find sufficient upon which to base a
decision on the issue in favor of the taxpayer. See Bernardo v.
Commissioner, T.C. Memo. 2004-199.
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