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extent of petitioner’s involvement with flea markets or her
success in earning income from this activity.
Petitioner attached a Schedule C to her 2001 tax return.
Except as described below, petitioner combined the income and
expenses of Avon, Prepaid Legal Services, and the flea markets on
the Schedule C. Petitioner reported $7,791 of gross receipts and
$24,171 of expenses for a $16,380 loss. Respondent did not
adjust the gross receipts. However, respondent disallowed all
but $172 of the claimed expense deductions. Petitioner filed a
timely petition for review of respondent’s determination.
Discussion
In general, the Commissioner’s determinations set forth in a
notice of deficiency are presumed correct, and the taxpayer bears
the burden of showing that the determinations are in error. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions
and credits are matters of legislative grace, and the taxpayer
bears the burden of proving entitlement to any deduction or
credit claimed on his return. See INDOPCO, Inc. v. Commissioner,
503 U.S. 79 (1992).
Pursuant to section 7491(a), the burden of proof as to
factual matters shifts to the Commissioner under certain
circumstances. Petitioner has neither alleged that section
7491(a) applies nor established her compliance with the
requirements of section 7491(a)(2)(A) and (B) to substantiate
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