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claimed they were entitled to deduct charitable contributions as
well as unreimbursed employee business expenses. The
unreimbursed employee business expenses petitioners claimed
included expenses for the business use of their home, cell phone,
Internet, equipment, automobile, hospitality, insurance,
publications, telephone, and uniform cleaning.
Respondent examined petitioners’ return for 2003 and issued
petitioners a deficiency notice in which he disallowed many of
the expenses for lack of substantiation. Petitioners timely
filed a petition.
Discussion
This is primarily a substantiation case. The parties
resolved many of the disputed expenses before trial. We are
asked to determine whether petitioners are entitled to deduct the
remaining expenses. We begin by outlining basic fundamental tax
principles involving substantiation. First, the Commissioner’s
determinations are generally presumed correct, and the taxpayer
bears the burden of proving that these determinations are
erroneous.3 Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992); Welch v. Helvering, 290 U.S. 111 (1933). Second,
deductions are a matter of legislative grace, and the taxpayer
3Petitioners do not claim the burden of proof shifts to
respondent under sec. 7491(a). Petitioners also did not
establish they satisfy the requirements of sec. 7491(a)(2). We
therefore find that the burden of proof remains with petitioners.
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