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each deduction available and show that all requirements have been
met. New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934). It is also the taxpayer’s responsibility to maintain
records sufficient to enable the Commissioner to determine the
correct tax liability. Sec. 6001; sec. 1.6001-1(a), Income Tax
Regs.4
The first issue is whether petitioners are entitled to
deduct the expenses that created net operating losses.
Respondent asserts that petitioners did not engage in the
activities with the requisite profit objectives, and,
alternatively, that, if petitioners operated the businesses for
profit, they failed to substantiate the expenses reported on
their Schedules C in excess of the reported gross income. The
Court agrees with respondent.5
Section 162 allows a deduction for ordinary and necessary
expenses that are paid or incurred during the taxable year in
4Under sec. 7454(a), the burden of proof as to fraud is on
the Commissioner. As to all other issues, sec. 7491(a), in some
instances, shifts the burden of proof to the Commissioner but
only as to the examination of taxpayers’ returns that commenced
after July 22, 1998. The examination in this case commenced in
1996; therefore, the Court does not need to address sec. 7491(a).
5Because the Court holds that petitioners may not deduct the
excess of the claimed Schedule C expenses so as to create net
operating losses for the years at issue due to lack of
substantiation, it is not necessary to address whether
petitioners were in fact operating a business for profit.
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