- 5 -
Discussion
Deductions are a matter of legislative grace, and the
taxpayer bears the burden of proving that he is entitled to any
deduction claimed. Rule 142(a); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934). This includes the burden of
substantiating the amount and purpose of the claimed deduction.
See Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd. per
curiam 540 F.2d 821 (5th Cir. 1976). The taxpayer is required to
maintain records that are sufficient to enable the Commissioner
to determine his correct tax liability. See sec. 6001; sec.
1.6001-1(a), Income Tax Regs.
Pursuant to section 7491(a), the burden of proof as to
factual matters shifts to respondent under certain circumstances.
Petitioners have neither alleged that section 7491(a) applies nor
established their compliance with the requirements of section
7491(a)(2)(A) and (B) to substantiate items, maintain records,
and cooperate fully with respondent’s reasonable requests.
Petitioners therefore bear the burden of proof.
Section 162(a) generally allows a deduction for ordinary and
necessary business expenses. To qualify as an allowable
deduction under section 162(a), an item must: (1) Be paid or
incurred during the taxable year; (2) be for carrying on any
trade or business; (3) be an expense; (4) be a necessary expense;
and (5) be an ordinary expense. Commissioner v. Lincoln Sav. &
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011