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submitted on the basis of a sparse record consisting of
petitioner husband’s testimony and limited documentary evidence.
Discussion
A. In General
Generally, the Commissioner’s determinations in a notice of
deficiency are presumed correct, and the taxpayer has the burden
to prove that the determinations are in error. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933).2 Deductions are a
matter of legislative grace, and a taxpayer must prove
entitlement to claimed deductions. Rule 142(a)(1); INDOPCO, Inc.
v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934). The taxpayer must keep
sufficient records to substantiate any deductions claimed. Sec.
6001. In the event that a taxpayer establishes a deductible
expense but is unable to substantiate the precise amount, the
Court may approximate the deductible amount, but only if the
taxpayer presents sufficient evidence to establish a rational
basis for making the estimate. Cohan v. Commissioner, 39 F.2d
540, 543-544 (2d Cir. 1930).
B. Casualty and Theft Losses
Petitioners challenge respondent’s disallowance of various
deductions they have claimed for casualty and theft losses.
2 Petitioners have not alleged and the record does not
support a conclusion that the burden of proof is shifted to
respondent pursuant to sec. 7491(a).
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Last modified: March 27, 2008