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Schedule E. Respondent determined that petitioner was not
entitled to the deduction because she did not engage in the
rental real estate activity with the objective of earning a
profit.
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).2
Tax deductions are a matter of legislative grace with the
taxpayer bearing the burden of proving entitlement to the
deductions claimed. Rule 142(a)(1); INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992).
Section 183
Section 183(a) disallows any deduction attributable to
activities not engaged in for profit except as provided under
section 183(b). Section 183(b)(1) allows those deductions that
otherwise are allowable regardless of profit objective. Section
183(b)(2) allows those deductions that would be allowable if the
activity were engaged in for profit, but only to the extent that
gross income attributable to the activity exceeds the deductions
permitted by section 183(b)(1). Section 183(c) defines an
2Petitioner has not raised the issue of sec. 7491(a), which
shifts the burden of proof to the Commissioner in certain
situations. This Court concludes that sec. 7491 does not apply
because petitioner has not produced any evidence that establishes
the preconditions for its application.
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