term benefit and deductible to the remaining extent. * * p. 412.] [Majority op. WHALEN and BEGHE, JJ., agree with this concurring in part and dissenting in part opinion. BEGHE, J., concurring in part and dissenting in part: Having joined the side opinions of Judges Ruwe and Halpern, I write on to empathize with the concerns that may underlie the majority's view on the treatment of the overhead costs, as amplified by Judge Swift's concurrence. It bears observing that the oft-quoted passage in the opinion of the Court of Appeals for the Seventh Circuit in Encyclopaedia Britannica, Inc. v. Commissioner, 685 F.2d 212, 217 (7th Cir. 1982), revg. T.C. Memo. 1981-255, which includes the statement that "The administrative costs of conceptual rigor are too great," was uttered in the course of sustaining the Commissioner's determination that the costs in issue in that case had to be capitalized. However, the Court of Appeals then suggested that the distinction between recurring and nonrecurring costs might provide the line of demarcation in some cases, but went on to observe that the distinction wouldn't make sense when the taxpayer's sole business was the creation or acquisition of capital assets. Although ACC's business includes the servicing as well as the acquisition of capital assets, the relatively short average time the acquired loans remain outstanding raises questions about administrability, the costs of conceptual rigor, and whether the exercise has been worth the candle. These musings lead me to suggest the time has come to request respectfully that the Congress step in and enact some bright-line rules that will provide guidance to the business community and the Internal Revenue Service and reduce the burdens of compliance and controversy on the public, the Service, and the courts. Sections 195 and 197 come to mind as possible starting points or models. GALE, J., agrees with this concurring in part and dissenting in part opinion. EARL G. HIGBEE AND LESLEY A. HIGBEE, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT Docket No. 14035-99. Filed June 6, 2001. Ps filed a petition seeking redeterminations of R's disallow- Earl G. Higbee and Lesley A. Higbee, pro sese. OPINION VASQUEZ, Judge: Respondent determined the following deficiencies in, addition to, and accuracy-related penalty on petitioners' 1996 and 1997 Federal income taxes: Unless otherwise stated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. After concessions, we must decide whether petitioners are entitled to the following deductions: (1) $1,328 for a casualty loss, (2) $6,937.20 for charitable contributions, (3) $6,468.09 for unreimbursed employee expenses, (4) certain amounts paid on account of a failed business as part of a chapter 13 bankruptcy proceeding, and (5) various expenses related to two rental properties. Finally, we must decide whether petitioners are liable for an addition to tax under section 6651(a)(1) and an accuracy-related penalty under section 6662(a). Background Petitioners contest respondent's determinations with regard to their 1996 and 1997 tax years. In the notice of deficiency, respondent disallowed the following deductions for 1996: (1) A $3,000 capital loss, (2) $57,099 in expenses listed on petitioners' Schedule A, Itemized Deductions, (3) $5,487 in expenses listed on petitioners' Schedule C, Profit or Loss From Business, and (4) $25,811 in expenses listed on petitioners' Schedule E, Supplemental Income and Loss. After concessions, the parties agreed that petitioners are entitled to: (1) The $3,000 capital loss, (2) $7,070 in itemized deductions,1 (3) $3,567 in Schedule C expenses (with the remainder still in dispute), and (4) the $25,811 Schedule E expenses. With regard to the 1997 tax year, respondent disallowed the following deductions: (1) A $3,000 capital loss, (2) $41,172 in itemized deductions, and (3) $25,965 in Schedule E expenses. After concessions, the parties agreed that petitioners are entitled to: (1) The $3,000 capital loss, (2) $12,083 in itemized deductions,2 and (3) the $25,965 Schedule E expenses. At trial, the only issue remaining with regard to the notice of deficiency was whether petitioners were entitled to the $1,920 in Schedule C deductions reported on petitioners' 1 The parties agreed that petitioners are entitled to deduct the following amounts: (1) $822 for taxes, (2) $1,189 for interest, (3) $1,500 for charitable contributions, (4) $484 for union dues, and (5) $3,075 for unreimbursed employee expenses. We remind the parties that when making their Rule 155 calculations, miscellaneous itemized deductions must be adjusted for the 2-percent floor. See sec. 67. 2 The parties agreed that petitioners are entitled to deduct the following amounts: (1) $3,263 for taxes, (2) $4,531 for charitable contributions, and (3) $4,289 for unreimbursed employee expenses. We note that petitioners claimed other expenses on their Schedule A in the section entitled "Job Expenses and Most Other Miscellaneous Deductions". Because petitioners have not raised any arguments with regard to those amounts, we treat their failure to raise any assignments of error as a concession. See Petzoldt v. Commissioner, 92 T.C. 661, 683 (1989). 1996 tax return and disallowed by respondent. Petitioners, however, raised new issues at trial by claiming additional deductions for a casualty loss, charitable contributions, unreimbursed employee expenses, and Schedule C and E expenses that were neither claimed on their returns nor raised in the notice of deficiency. We combine our findings of fact and opinion under each separate issue heading. Some of the facts have been stipulated and are so found. The stipulation of facts, the supplemental stipulations of facts, and the attached exhibits are incorporated herein by this reference. At the time petitioners filed their petition, they resided in Phoenix, Arizona. Discussion I. Disallowed Deductions Deductions are a matter of legislative grace, and a taxpayer bears the burden of proving that he is entitled to the deductions claimed. See Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435 (1934). The taxpayer is required to maintain records that are sufficient to enable the Commissioner to determine his correct tax liability. See sec. 6001; sec. 1.6001-1(a), Income Tax Regs. In addition, the taxpayer bears the burden of substantiating the amount and purpose of the claimed deduction. See Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976). Section 7491(a), a new provision created by Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, places the burden of proof on respondent with regard to certain factual issues. Section 7491 applies to examinations commenced after July 22, 1998. See RRA 1998 sec. 3001(c), 112 Stat. 727. The examination in the instant case commenced after July 22, 1998; accordingly, we evaluate whether respondent bears the burden of proof pursuant to section 7491(a). Section 7491(a)(1) provides that if, in any court proceeding, the taxpayer introduces credible evidence with respect to factual issues relevant to ascertaining the taxpayer's liability for a tax (under subtitle A or B), the burden of proof with respect to such factual issues will be placed on the Commis sioner. For the burden to be placed on the Commissioner, however, the taxpayer must comply with the substantiation and record-keeping requirements of the Internal Revenue Code. See sec. 7491(a)(2)(A) and (B). In addition, section 7491(a) requires that the taxpayer cooperate with reasonable requests by the Commissioner for "witnesses, information, documents, meetings, and interviews". Sec. 7491(a)(2)(B). Finally, the benefits of section 7491(a) are unavailable in the cases of partnerships, corporations, and trusts unless the taxpayer meets the the net worth requirements of section 7430(c)(4)(A)(ii). See sec. 7491(a)(2)(C). Respondent argues that because petitioners have failed to meet the requirements of section 7491(a)(1) and (2), the burden of proof should remain with petitioners as to the remaining issue associated with respondent's determination of petitioners' 1996 tax liability. We therefore examine the evidence to establish whether petitioners have presented credible evidence and have met the other requirements of section 7491(a)(1) and (2) so as to place the burden of proof on respondent. A. Casualty Losses Pursuant to section 165(a) and (c)(3), a taxpayer is allowed a deduction for an uncompensated loss that arises from fire, storm, shipwreck, or other casualty. Section 165(h), however, states that any "loss *** shall be allowed only to the extent that the amount of the loss to such individual arising from each casualty *** exceeds $100" and only to the extent that the net casualty loss "exceeds 10 percent of the adjusted gross income". When property is damaged rather than totally destroyed by casualty, the proper measure of the amount of the loss sustained is the difference between the fair market value of the property immediately before and after the casualty, not to exceed the property's adjusted basis. See sec. 1.1657(b)(1), Income Tax Regs. The fair market values required by the Treasury regulations must generally be ascertained by competent appraisal. See sec. 1.165-7(a)(2)(i), Income Tax Regs. As an alternative, the Treasury regulations provide that if the taxpayer has repaired the property damage resulting from the casualty, the taxpayer may use the cost of |