James A. and Joan H. Soholt - Page 6




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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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