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In general, deductions are a matter of legislative grace.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). Taxpayers
are required to maintain records sufficient to enable the
Commissioner to determine their correct tax liability. Sec.
6001; Higbee v. Commissioner, 116 T.C. 438 (2001); sec. 1.6001-
1(a), Income Tax Regs. Such records must substantiate both the
amount and purpose of the claimed deductions. Higbee v.
Commissioner, supra.
Section 162 allows a deduction for ordinary and necessary
expenses that are paid or incurred during the taxable year in
carrying on a trade or business. Sec. 162(a); Deputy v. duPont,
308 U.S. 488, 495 (1940).
At trial, petitioner offered into evidence copies of various
checks that were issued purportedly for payment of expenses
related to the activity; however, no documentation was offered to
tie in or corroborate that such payments were in connection with
the business activity. Petitioner claims he had such information
at home and did not realize that such information was crucial to
his case.
2(...continued)
comply with the substantiation and record-keeping requirements of
the Internal Revenue Code. Sec. 7491(a)(2)(A) and (B). On this
record, petitioner has not wholly satisfied that requirement;
therefore, the burden has not shifted to respondent under sec.
7491. Higbee v. Commissioner, 116 T.C. 438 (2001).
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Last modified: May 25, 2011