§162 — Trade or business expenses

Held, further, P has provided no compelling argument to overrule our precedent holding that I.R.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

345, 351 (1994), superseded by legislation and supplemented 107 T.C.

In Reise we thereupon overruled Aaron and reaffirmed the position we took in Polk that the interest on the tax underpayment was attributable to the taxpayer’s trade or business.

He asserts that the criminal charges are distinguishable from the business of 6 HOCA LLC as the charges arose from Mr.

The fact that petitioners could have performed the same work with other tractors, as respondent argues, is inapposite to the question of deductibility, provided that the requirements of sections 167 and 168 are satisfied.

Unlike the television station in Richmond Television, however, Vizala had no revenue until well after going live. See id. at 903–04, 909 (explaining that the station launched in 1956 and sought to carry forward its business expense deductions as net operating losses to 1956 and 1957, which indicates it had income in those years). Respondent argues that none of the expenditures petitioner reported on Schedule C, even amounts paid after the website opened, is a section 162 expense because Vizala h

Petitioner’s reliance on Bagley is inappropriate.13 Unlike the taxpayer’s expenses in Bagley, petitioner’s whistleblowing expenses are personal and nondeductible, since his whistleblowing activities were merely a continuation of his personal lawsuits against his Laguna Beach neighbors brought under the guise of alleging a CWA violation and not business expenses under section 162.

Accordingly, Sullivan and Tellier are inapposite to the case here.

Unlike a payment representing a return of capital, the payments are not tied to the financial success of the partnership.35 Like a salary, guaranteed payments are ordinary income to the partners and deductible to the partnership under section 162 or 263, as appropriate.36 The Hohls and the Blakes argue that because guaranteed payments are not considered part of a partner’s distributive share only for purposes of section 61(a) and section 162(a), they are considered as “distributive shares of par

Because petitioners in any event reported no gross receipts for Shrike Cars and offered no evidence indicating that any goods were disposed of by the venture, and because the parties did not distinguish at trial or on brief between the various components of the Shrike Cars loss, we shall treat the $374,885 amount as a claim for additional business expenses under sec. 162.

14After we issued our decision in Fort Howard, Congress amended section 162(k) to add an exception to the general rule. See Small Business Job Protection Act of 1996, Pub. L. No. 104-188, sec. 1704(p)(2), 110 Stat. at 1886 (amending sec. 162(k)(2) to add sec. 162(k)(2)(A)(ii)). Under that exception, “the expense disallowance rule of section 162(k) does not apply to any ‘deduction for amounts which are properly allocable to indebtedness and amortized over the term of such indebtedness.’” Fort How

Unlike a payment representing a return of capital, the payments are not tied to the financial success of the partnership.35 Like a salary, guaranteed payments are ordinary income to the partners and deductible to the partnership under section 162 or 263, as appropriate.36 The Hohls and the Blakes argue that because guaranteed payments are not considered part of a partner’s distributive share only for purposes of section 61(a) and section 162(a), they are considered as “distributive shares of par

14After we issued our decision in Fort Howard, Congress amended section 162(k) to add an exception to the general rule. See Small Business Job Protection Act of 1996, Pub. L. No. 104-188, sec. 1704(p)(2), 110 Stat. at 1886 (amending sec. 162(k)(2) to add sec. 162(k)(2)(A)(ii)). Under that exception, “the expense disallowance rule of section 162(k) does not apply to any ‘deduction for amounts which are properly allocable to indebtedness and amortized over the term of such indebtedness.’” Fort How

14After we issued our decision in Fort Howard, Congress amended section 162(k) to add an exception to the general rule. See Small Business Job Protection Act of 1996, Pub. L. No. 104-188, sec. 1704(p)(2), 110 Stat. at 1886 (amending sec. 162(k)(2) to add sec. 162(k)(2)(A)(ii)). Under that exception, “the expense disallowance rule of section 162(k) does not apply to any ‘deduction for amounts which are properly allocable to indebtedness and amortized over the term of such indebtedness.’” Fort How

Because petitioners in any event reported no gross receipts for Shrike Cars and offered no evidence indicating that any goods were disposed of by the venture, and because the parties did not distinguish at trial or on brief between the various components of the Shrike Cars loss, we shall treat the $374,885 amount as a claim for additional business expenses under sec. 162.

In particular, expenses ofdaily commuting (unlike travel expenses, see sec. 162(a)(2)) are generally not deductible because such expenses constitute personal expenses.

They used the credit cards for both personal and business expenses, failed to adequately distinguish the expenses as personal verus business, and deducted personal expenses. They lacked adequate business records for a substantial portion ofthe disputed deductions. See sec. 6001. Section 162(a) permits taxpayers to deduct ordinary and necessary expenses paid or incurred in carrying on a trade or business.

162). Section 1402(c)(2) generally excludes from the definition ofa "trade or business" services performed by a tax- payer as an employee. But this exclusion does not apply to services performed in - 17 - [*17] the United States by an employee ofan "international organization." See sec.

Petitioner argues that he is entitled to deductions for these fees under section 162(a) because they were paid to defend a claim for profits earned in his trade or business. Petitioner implicitly argues that he is entitled to these deductions under section 212 ifsection 162 does not apply.

They used the credit cards for both personal and business expenses, failed to adequately distinguish the expenses as personal verus business, and deducted personal expenses. They lacked adequate business records for a substantial portion ofthe disputed deductions. See sec. 6001. Section 162(a) permits taxpayers to deduct ordinary and necessary expenses paid or incurred in carrying on a trade or business.

They used the credit cards for both personal and business expenses, failed to adequately distinguish the expenses as personal verus business, and deducted personal expenses. They lacked adequate business records for a substantial portion ofthe disputed deductions. See sec. 6001. Section 162(a) permits taxpayers to deduct ordinary and necessary expenses paid or incurred in carrying on a trade or business.

212 deductions, unlike sec. 162(a) deductions, are generally deductible only to the extent they exceed 2% of an individual's adjusted gross income, see sec.

They used the credit cards for both personal and business expenses, failed to adequately distinguish the expenses as personal verus business, and deducted personal expenses. They lacked adequate business records for a substantial portion ofthe disputed deductions. See sec. 6001. Section 162(a) permits taxpayers to deduct ordinary and necessary expenses paid or incurred in carrying on a trade or business.

They used the credit cards for both personal and business expenses, failed to adequately distinguish the expenses as personal verus business, and deducted personal expenses. They lacked adequate business records for a substantial portion ofthe disputed deductions. See sec. 6001. Section 162(a) permits taxpayers to deduct ordinary and necessary expenses paid or incurred in carrying on a trade or business.

Unlike interest, the late fee does not accrue periodically but is instead charged only once. Regardless of whether the late fees are deductible as interest under sec. 163, because oftheir nexus to CHMD's acquisition ofequipment used in the operation ofits medical practice, they qualify as ordinary and necessary business expenses and would be deductible under sec. 162(a).

are distinguishable from those in the instant matter. In rejecting the taxpayer's position, we emphasized that the subsidiaries had not begun operations at the time the expenses were incurred and thus the subsidiaries' expenses were notproperly deductible under section 162.

Commissioner, 400 F.2d 407, is materially distinguishable from a case like the instant case involving "consolidated corporate income tax reporting and attempted double deductions ofbusiness losses".

Expenses associated with the ground floor office are the only expenses which may be deducted under section 162.° Petitioner may deduct repair and maintenance expenses and depreciation based on the percentage ofthe home used exclusively for the business, i.e. the square footage ofthe first floor office. "Sec. 280A imposes additional rules on individuals and S corporations with respect to home office deductions. Petitioner and Vanini are both C corporations; therefore sec. 280A is inapplicable in

However, he argues .inexplicably that because his business was on the accrualsmethod the cases respondent,cites not only are inapposite but also - 7 - support his position.2 Perhaps petitioner did not read Rink or he failed to read it carefully.

Because "any tra eling expense" under section 162 is subject to the strict substantiation requirements of section 274(d), the Cohan doctrine does not apply, and we therefore will not estimate the amount of a y additional feductible commuting expenses petitioner may have incurred by transporting his tools." We reject petitioner's argument that the strict · substantiation rcquirements of sec.

It carefully'distinguished punitive from compensatory restitution, even in criminal cases, and reasoned that Stephens' restitutio n 4( . . .continued) nondeductible by section 162(f), because it was "an amount due and owing", and there was no public policy against allowing the deduction .

expenses but rather primarily personal expenses .8 Characterizing respondent's discussion of the trade, or business requirement of section 162(a) as "inapposite" and thereby implicitly conceding that the DPM nonrental activity wa s not a,trade or business, petitioner contends on brief that DPM's deduction of the .disputed expenses was based not upon section 162(a) butupon section 212(2) .9 Petitioner contends that DPM' s 'Respondent argues alternatively th

The designation of section 165(d) as a subsection of section 165 (which, unlike section 23 of the 1934 Act and 1939 Code, contains only a few of the kinds of deductions the income- tax law allows) might suggest that section 165(d) does not limit deductions allowable under other sections of the Code (such as section 162) .

Commissionerl is inapposite to the facts herein because it involves the meaning of "tax home" under I.R.C.

We found those authorities to be materially distinguishable from the instant cases and - 113 - petitioners' reliance on those authorities to be misplaced .103 On the record before us, we reject petitioners' substantial author- ity argument : We turn now to petitioners' reasonable cause argument' .

The Court concludes that section 7491 does not apply here because petitioner has not produced any evidence that establishes the preconditions for its application .

Therefore section 7491 does not apply here.

644 (1975), the (continued...) - 53 - States, 731 F.2d at 1184-1185 (court distinguished the credit card cases by virtue of the fact that the expense of the taxpayer before it created a separate and distinct asset). Contrary to petitioners’ assertion (and, as discussed infra, the view of the Court of Appeals for the Third Circuit), we do not read any of the credit card cases to hold that everyday, recurring expenses are ipso facto deductible under section 162(a).

Petitioner is required to provide a business purpose for expenses claimed under section 162. Without a clear indication of what amounts constitute “general” expenses, we cannot allow a deduction in excess of respondent’s previously allowed amount. Respondent is sustained on this issue. 4. Business Use of Home Section 280A generally prohibits deduction of otherwise allowable expenses with respect to the use of an individual taxpayer’s home. This prohibition, however, does not apply to any item th

are not materially distinguishable from the facts of the instant cases.

Given that petitioners have failed to establish that the expenses were ordinary, we need not decide whether the expenses met the other requirements for deductibility under section 162.

We need not decide whether petitioner’s employment in Hobbs was temporary.

Additionally, even if petitioner's understatement is substantial as defined by section 6662(d)(1)," we "After the allowance ofthe Lifetime Learning Credit, it is unclear whether petitioner's understatement exceeds the greater of$5,000 or 10% ofthe tax required to be shown on the return for the year in issue and is a substantial understatement as defined by sec.

We express no opinion regarding CFF's operations for any taxable year other than 2013.

More fundamentally, the IRS argues, the Court need not decide whether the $450,000 payment was made to a welfare-benefit fund or whether it was a payment ofemployee compensation under a plan of deferred compensation because the payment is not deductible as a business expense under section 162.2 We need not resolve all ofthe issues raised by the parties.

We therefore need not decide whetherpetitioners satisfied the requirements of section 7491(a).

7We need not decide who bears the burden ofproving the applicability of sec.

But before engaging in the "ordinary and necessary" inquiry, taxpayers must pass the section 183 test.¹ I Because we decide this issue on a preponderance ofthe evidence, we need not decide whetherthe burden ofproofshifts to the Commissioner under section (continued...) - 3 - [*3] Section 183(a) generally disallows any deduction attributable to an activity "not engaged in for profit," and is aimed at disallowing the deduction ofthe expenses ofa hobby that a taxpayermight try to use t

But before engaging in the "ordinary and necessary" inquiry, taxpayers must pass the section 183 test.¹ I Because we decide this issue on a preponderance ofthe evidence, we need not decide whetherthe burden ofproofshifts to the Commissioner under section (continued...) - 3 - [*3] Section 183(a) generally disallows any deduction attributable to an activity "not engaged in for profit," and is aimed at disallowing the deduction ofthe expenses ofa hobby that a taxpayermight try to use t

But before engaging in the "ordinary and necessary" inquiry, taxpayers must pass the section 183 test.¹ I Because we decide this issue on a preponderance ofthe evidence, we need not decide whetherthe burden ofproofshifts to the Commissioner under section (continued...) - 3 - [*3] Section 183(a) generally disallows any deduction attributable to an activity "not engaged in for profit," and is aimed at disallowing the deduction ofthe expenses ofa hobby that a taxpayermight try to use t

However, we need not decide whether petitioners satisfy the requirements ofsection 7491(a)(1) and (2) with respect to the remainder ofthe issues in this case because we decide them on the preponderance ofcredible evidence and not on any failure to carry the burden ofproof.

Because we decide whetherpetitioner was engaged in an active trade or business during 2006 on the preponderance ofthe evidence, we need not decide - whether section 7491 applies.

The term "negligence" includes any failure to make a reasonable attempt to Because we hold that petitioner's expenditures for flight lessons were not ordinary and did not maintain or improve his skills as a commercial realtor, we need not decide whether those lessons qualify him for a new trade or business, thus making the expenditures nondeductible under sec.

In the light of the statutory regime we are not convinced°that section 832(b) was intended to have the Annual Statement control the treatment of - extracontractual losses for Federal tax purposes.

The Court need not decide whether Mr .

We are not convinced'that petitioner's payment in 2001 is deductible.

We question whether Mr.

We need not decide the issue on that ground as petitioner has failed to show that the consulting fee expense was ordinary and necessary.

Alternatively, a ‘new theory’ is a new argument about the existing evidence.” (Citations omitted.) We disagree with petitioners’ position.

We disagree with respondent's rationale for his disallowance ofthat depreciation deduction.

- 25 - We disagree with petitioner.

However,.we disagree with respondent that the transaction is in substance a reacquisition of petitioner's stock.

We disagree with petitioners ., They earned $165 in interest income, and it was credited to their accounts .

60, we disagree with the reasoning therein and decline to adopt that reasoning.11 See Stark v.

We disagree with petitioner's position that section 1012 and the regulations thereunder are determinative of the cost of Consolidated's customer cores for purposes of section 471.

- 10 - when any cost exceeds that of a normal counterpart, and that cost is solely for the mitigation or alleviation of a disability and one that provides functionality to the disabled, this above normal cost is deductible as a medical expense confined to the limitation that its primary function is not that of normal and ordinary to and from work travel when the principles of this type of deductibility cost are applied in this area.

We hold that it is.”), aff’g T.C.

2 Section 162 provides in pertinent part “[t]here shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” (Emphasis added.) 3 Gordon Group, a single-member limited liability company owned by Mr.

He has thus failed to carry his burden to prove error in respondent’s determination, and we hold that Robert received and failed to report $907,024 of compensation income from BCH for 2009.

We hold that he may not deduct these expenses.

For similar reasons, we hold that JYJ is not entitled to the marketing fee deductions for the years in issue.

Educators may deduct unreimbursed employee expenses in excess of the $250 allowance provided by section 62(a)(2)(D) as miscellaneous itemized deductions on Schedule A pursuant to section 162.

Accordingly, we conclude that petitioner is entitled to a deduction for each of these three expenses (namely the $500, $120, and $1,295 described above) pursuant to section 162.

We hold, therefore, that FMC’s leasing of the airplane did not place the airplane in service for a specifically assigned function.

Served 05/17/23 2 [*2] We hold that Dr.

Schedule C expenses Pursuant to section 162(a), a taxpayer may deduct “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business”.

Larson failed to present any credible evidence showing that Morley’s business expenses in tax years 2000 and 2001 were ordinary and necessary pursuant to section 162.

Wolpert is liable for an accuracy-related penalty under section 6662(a) with respect to taxable year 2017.2 We hold that Mr.

Wolpert is liable for an accuracy-related penalty under section 6662(a) with respect to taxable year 2017.2 We hold that Mr.

Whether an expense is deductible pursuant to section 162 is a question of fact to be decided on the basis of all relevant facts and circumstances.

Whether an expense is deductible pursuant to section 162 is a question of fact to be decided on the basis of all relevant facts and circumstances.

Even if we concluded that the race car expenses were ordinary and necessary expenses pursuant to section 162, we are not able to determine which - 8 - [*8] expenses would be deducted as race car expenses.

Accordingly, we hold that the payments were unreported income and sustain respondent’s inclusion of $29,501 for 2017 in petitioner’s gross income.

Even if we concluded that the race car expenses were ordinary and necessary expenses pursuant to section 162, we are not able to determine which - 8 - [*8] expenses would be deducted as race car expenses.

Conclusion We hold that the disputed legal expenses that Mylan incurred during the years at issue to prepare paragraph IV notice letters must be capitalized pursuant to section 263(a), whereas expenses incurred to litigate Section 271(e)(2) suits are - 48 - currently deductible pursuant to section 162(a).

Ruzendall withdrew as a business expense pursuant to section 162(a)(1).

Pursuant to section 162(l), the deduction may not exceed the "taxpayer's earned income (within the meaning ofsection 401(c)) derived by the taxpayer from the trade or business with respect to which the plan providing the medical care coverage is established." Sec.

Whether an expense is deductible pursuant to section 162 is a question offact to be decided on the basis ofall relevant facts and circumstances.

We hold that the Abregos are liable for the tax subject to limitations; and 2.

Whether an expense is deductible pursuant to section 162 is a question offact to be decided on the basis ofall relevant facts and circumstances.

2010 Schedule A miscellaneous expenses For 2010 a taxpayer may claim an unreimbursed employee business expense as a miscellaneous deduction on Schedule A, pursuant to section 162(a).

- 34 - [*34] We hold that the $210 expense is deductible under section 162(a) for 2012.

Cutting Horse Activity Breeding, raising, training, and showing horses may be an activity entered into for profit pursuant to section 162.

In the light ofthe evidence in the record, we hold that petitioner is entitled to deduct $3,319 for this item.

Instead we hold that these deficiency cases could not have been raised in the same case, and did not arise from the same transactional nucleus offact.

Petitioners contend that petitioner husband's business was a trade or business pursuant to section 162 and not an activity not engaged in for profit pursuant to section 183 and that the expenses were ordinary and necessary.

On this record, applying either the test ofthis Court or that ofthe Court of Appeals for the Ninth Circuit, we hold that Mr.

We do not need to address respondent's economic substance argument because the deductions for the consulting fees are not allowable pursuant to section 162.

Instead we hold that these deficiency cases could not have been raised in the same case, and did not arise from the same transactional nucleus offact.

Petitioners contend that petitioner husband's business was a trade or business pursuant to section 162 and not an activity not engaged in for profit pursuant to section 183 and that the expenses were ordinary and necessary.

Instead we hold that these deficiency cases could not have been raised in the same case, and did not arise from the same transactional nucleus offact.

We hold that they are not, except inasmuch as their expenses for travel health insurance may be deductible under section 213(a).

Whether an expense is deductible pursuant to section 162 is a question offact to be decided on the basis ofall relevant facts and circumstances.

We hold that they are not, except inasmuch as their expenses for travel health insurance may be deductible under section 213(a).

In the FPAAs respondent disallowed deductions claimed pursuant to section 162 and instead allowed the deductions pursuant to section 212, reflecting respondent's determination that Lender Management was not engaged in carrying on a trade or business.

In the FPAAs respondent disallowed deductions claimed pursuant to section 162 and instead allowed the deductions pursuant to section 212, reflecting respondent's determination that Lender Management was not engaged in carrying on a trade or business.

Whether an expense is deductible pursuant to section 162 is a question offact to be decided on the basis ofall relevant facts and circumstances.

Accordingly, we hold that petitioner is not entitled to an interest expense deduction for 2010.

Accordingly, we hold - 10 - that petitioner's trading activity was a trade or business and that any deductions would be used to determine adjusted gross income.

We hold that they are not, except inasmuch as their expenses for travel health insurance may be deductible under section 213(a).

Section 162 requires a 25Gantner v.

On the basis ofher testimony, and considering the nature ofthese expenses in the context ofher business, we hold that her testimony is sufficient to satisfy the requirements ofsection 162 and to support the claimed deduction.

We hold that section 481 adjustments are required, and we leave the application ofsection 481 in these cases to the parties' agreement or a Rule 155 computation.

Section 183(c) provides: "For purposes ofthis section, the term 'activity not engaged in for profit' means any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." Section 162 applies to trade or business expenses, while section 212(1) and (2) allows a deduction, respectively, for expenses incurred "for the production or collection ofincome" and for the management, conservation, or maintenance

We hold that she is not.

Accordingly, we hold that petitioner is liable for the accuracy-relatedpenalties under section 6662(a) for the taxable years 2006-11 for her underpayments oftax.

As explained below, we hold that Kilpatrick is not entitled to a deduction for supplies for 2009.

Accordingly, we hold that petitioner is liable for the accuracy-relatedpenalties under section 6662(a) for the taxable years 2006-11 for her underpayments oftax.

- 3 - [*3] OPINION A taxpayer is, pursuant to section 162(a), entitled to deduct all ordinary and necessary unreimbursed business expenses paid or incurred in carrying on a trade or business.

Accordingly, we hold that petitioner is not entitled to a deduction for travel expenses in excess ofthe amount respondent has already allowed.

For these reasons, we hold that the $4,025,039 and $7,300,916 petitioner paid as officer compensation in 2003 and 2004, respectively, were reasonable and therefore deductible under section 162(a)(1).

For the reasons set forth below, we hold for respondent.

Whether an expense is deductible pursuant to section 162 is a question offact to be decided on the basis ofall relevant facts and circumstances.

We hold for the Commissioner on this issue.

We hold that section 481 adjustments are required, and we leave the application ofsection 481 in these cases to the parties' agreement or a Rule 155 computation.

Section 162 requires a taxpayerto be presently engaged in a trade or business in - 6 - order for education expenses to be deductible.

) whether petitioner's horse racing activity during taxable years 2010-12 (years at issue) was an activity engaged in for profit within the meaning ofsection 183; (2) ifso, whether petitioner's claimed deductions on Schedules C, Profit or Loss From Business, were for ordinary and necessary expenses pursuant to section 162, and whether petitioner substantiated expenses underlying his claimed Schedule C expense ¹Unless otherwise indicated, all section references are to the Internal Revenue Code in

Section 162 provides that a taxpayerwho is carrying on a trade or business may deduct ordinary and necessary expenses incurred in - 8 - connection with the operation ofthe business.

Petitioners contend that these expenses have been adequately substantiated and therefore are deductible as trade or business expenses pursuant to section 162.

- 4 - defining deductible business expenses pursuant to section 162 and the interrelationship ofthat section with section 262, defining nondeductible personal expenses.

Pursuant to section 162(a), a taxpayermay deduct all ofthe ordinary and necessary business expenses paid or incurred during the taxable year in carrying on the taxpayer's trade or business.

These expenses may not be subject to the strict substantiation requirements ofsection 274(d), but section 162 requires more detail than petitioners have offered.

Consequently, we hold that petitioners are entitled to deduct $1,295 for charitable contributions for 2010.

Pursuant to section 162(a), a taxpayermay deduct all ofthe ordinary and necessary business expenses paid or incurred during the taxable year in carrying on the taxpayer's trade or business.

We hold it should not; (2) whether Twin City's payments totaling $371,892 incurred on the Schanks' behalffor the construction oftheir house and a barn, payment of personal credit card bills, and purchase ofa 2009 Can-Am Spyder Roadster (Spyder) should be characterized as compensation under section 162(a)(1

We hold it should not; (2) whether Twin City's payments totaling $371,892 incurred on the Schanks' behalffor the construction oftheir house and a barn, payment of personal credit card bills, and purchase ofa 2009 Can-Am Spyder Roadster (Spyder) should be characterized as compensation under section 162(a)(1

Under the circumstances, we are unable to determine whetherthe items constitute ordinary and necessary business expenses that may be deducted pursuant to section 162(a).

(Legacy), were deductible, pursuant to section 162,2 as insurance expenses.

On the basis ofthe foregoing, we hold that petitioner is not entitled to a passthrough deduction, under section 162, 165, or 212, for a pro rata share of takeout.

Pursuant to section 162(a), a taxpayermay deduct "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

On the basis ofthe foregoing, we hold that petitioner is not entitled to a passthrough deduction, under section 162, 165, or 212, for a pro rata share of takeout.

We hold that it did; 2) whether petitioner improperly claimed section 162 business deductions of $1,249,925 for professional fees it incurred during its 2003 taxable year.

Conclusion Considering all the facts and circumstances and weighing the factors analyzed above, we hold that petitioner did not conduct his gambling activity in a businesslike manner and he did not engage in that activity with the requisite profit objective during the years in issue.

We hold that he is not.

Because we find on this record thatthe Far Rockaway property was a rental property in 2009, we hold that petitioner is entitled to deduct $16,138 in mortgage interest and $753 in real estate taxes as trade or business expenses under section 162.

Because ofour findings that petitioners maintained a permanent residence in Gulfport and had no principal place ofemployment during - 18 - [*18] the years at issue, we hold that Gulfport was petitioners' tax home during those years." Respondent argues that petitioners' work assignments from Messages, Inc., were indefinite ratherthan temporary within the purview ofthe flush language in section 162(a), which provides that a "taxpayer shall not be treated as being tempor

Conclusion Considering all the facts and circumstances and weighing the factors analyzed above, we hold that petitioner did not conduct his gambling activity in a businesslike manner and he did not engage in that activity with the requisite profit objective during the years in issue.

210, 233 (1983) (noting that an intent to make a profit for purposes ofsection 162 requires an intent to make an economic profit, independent oftax savings).

Accordingly, we hold that petitioners are liable for the accuracy-related penalties under section 6662(a) for their underpayments oftax for the years at issue.

Respondent does not dispute that the arrangement involved insurable risks, and we hold that the captive arrangement shifted risks, distributedrisks, and constituted insurance in the commonly accepted sense.

Therefore, the court held that the LILO transaction did not constitute a true lease and ConEd's rent deductions were disallowed under section 162(a)(3). The Test Transactions Respondent argues that John Hancock's LILO and SILO transactions lack economic substance and that the substance ofeach transaction is not consistent with its form.

Section 162 provides for the deduction ofall ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

We hold that Rehman is not entitled to any deduction for medical or dental expenses for.2007.

We hold they are not.

In accordance with section 1.170A- 13(c)(5)(iv)(C) and (D), Income Tax Regs., the donee or an employee ofthe donee - 23 - cannot serve as a qualified appraiser.1° Consistent with the foregoing, we hold that petitioners are not entitled to a deduction for noncash charitable contributions in excess ofthe amount respondent allowed.

Therefore, we hold that thé burden ofproofdoes not shift to respondent.

We hold that it is subject to tax.

We hold that they are not.

We hold that the Bigdelis may not deduct any amounts for car-and-truck expenses for either tax year.

Accordingly, we hold that petitioners arè not entitled to a deduction for office,supplies for the 2007 tax year.

Therefore, the court held that the LILO transaction did not constitute a true lease and ConEd's rent deductions were disallowed under section 162(a)(3). The Test Transactions Respondent argues that John Hancock's LILO and SILO transactions lack economic substance and that the substance ofeach transaction is not consistent with its form.

Professional fees paid or incurred in carrying on a trade or business generally are deductible pursuant to section 162(a).

We hold he is not entitled to a deduction for that alleged contribution.

consider whether petitioner is entitled to deduct Schedule C expenses of$55,722 and $33,470 for his 2007 and 2008 tax years, respectively.1° Petitioner claims that these expenses were related to his flute making activity and are deductible as either ordinary and necessary trade or business expenses pursuant to section 162 or as expenses incurred in transactions entered into for 9At trial petitioner alleged for the first time that he was not an employee but an independent contractor.

Accordingly, we hold CEG's 2004 gross receipts are increased by $52,397.

Without.more, we hold that petitioners have failed to sub¼tantiate the disputed charitable contributions and respondent's determination disallowing the deduction is sustained.

Therefore, the court held that the LILO transaction did not constitute a true lease and ConEd's rent deductions were disallowed under section 162(a)(3). The Test Transactions Respondent argues that John Hancock's LILO and SILO transactions lack economic substance and that the substance ofeach transaction is not consistent with its form.

Conclusion After review ofeach factor discussed above, we hold that Mr.

We hold they are not; and (2) whether petitioners are liable for the accuracy-related penalties under section 6662.

Because we find that personal considerations primarily motivated the security system installation, we hold that respondent properly denied the related deduction.

Generally, a cash basis taxpayer may deduct business expenses pursuant to section 162(a) for the taxable year in which the expenses are paid.

Pursuant to section 162(a), a taxpayer is entitled to deduct all of the ordinary and necessary business expenses paid or incurred during the taxable year in carrying on a trade or business.

We hold that Goyak & Associates may not deduct the payment, as it is not an ordinary and necessary business expense under section 162 (a) ; (2) whether the $1.4 million paid to the Millennium Plan is taxable to Mr.

For the reasons that follow, we hold that petitioners have not established that they are entitled to the business expense deductions claimed.

We hold that he is not; (2) whether petitioner is entitled to a section 162 business expense deduction of$3,838.50 for expenses incurred in storing client case files.

3 - Held, further, the transactions underlying the claimed capital loss lacked economic substance. Accordingly, $352,251 in fees incurred to effect the transactions is not deductible as an ordinary and necessary business expense under I.R.C. sec. 162. Held, further, in accordance with Heasley v.

Therefore, we hold that petitioners are not liable for the section 6662(a) penalty.

Section 162 Pursuant to section 162(a), a taxpayer is entitled to deduct "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

Section 162 provides a deduction for ordinary and necessary business expenses.

We hold that the Floods are not entitled to a deduction for "402 lot re tax." 10.

Accordingly, we hold petitioners may not deduct trade or business expenses in addition to those respondenthas already allowed.

Respondent, in his trial memorandum, contends that petitioner has not shown that he is entitled to any amounts in excess of those that were not questioned during the examination.3 Section 162 provides for a deduction for ordinary and necessary expenses paid or incurred in carrying on a trade or business.

Section 162 Pursuant to section 162(a), a taxpayer is entitled to deduct "all the ordinary and necessáry expenses paid or ircurred during the taxable year in carrying on any trade or business".

Whether an expense is deductible pursuant to section 162 is a question offact to be decided on the basis ofall the relevant facts and circumstances.

We hold that she was engaged in the trade or business offilm production during each ofthe years at issue and that she was engaged in this business for profit.

Accordingly, we hold thatpetitioner is not entitled to deduct other supplies expenses for2005.

Consequently, we hold petitioner may not deduct the expenditures claimed on the second Schedule C for 2007.

Because Oglesby sold the rental property for a tax loss during 2005, we hold that his loss should be increased by $4,150, the amount -for which he claimed a deduction.

For the reasons set.forth below, we hold for respondent.

Morgan's renovation activities qualify as a trade or business pursuant to section 162.

Accordingly, we hold that petitioner is entitled to deduct $100,000 as a pension plan payment on-its 1989 tax return under section 162.

Accordingly, we hold that petitioners have failed to prove the:.r entitlement to.additional deductions for legal fees because they have not proved that these fees were paid "Whereas petit'oners contend that their 1988 net worth should be increased by $1,538 to reflect ownership of the copier, we limit the increa ed net

2010-115, aga~in r without ruling - on whether tlie plan met the requirements of - section 419A(f) (6) , we held that contributions were distributions of prc its to the employee-owners andonot deductible pursuant to section 162 (a) .

Advertising expenses to promote a taxpayer's trade or business are deductible pursuant to section 162(a).

Deductions Under Sections 162 and 212 Section 162 provides for a deduction for all ordinary and necessary expenses paid or incurred during the year in cagrying on any trade or- business.

Robins_on's__Expe_ns_ees Pursuant to section 162(a), a taxpayer is entitled to deduct all of the ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Accordingly, we hold that petitioners have failed to prove the:.r entitlement to.additional deductions for legal fees because they have not proved that these fees were paid "Whereas petit'oners contend that their 1988 net worth should be increased by $1,538 to reflect ownership of the copier, we limit the increa ed net

Consequently', we hold that petitioners' $4,075 in legal and professional fee expenses constitute ordinary and necessary business expenses within the purview öf section 162.

Thus, he was not, pursuant to section 162, carrying on a trade or business.

The Court holds that pursuant to section 162 petitioner can deduct his business expenses for.the taz years 2004 and 2005 as stipulated and can deduct an estimated amount of the.other expenses for..the tax years 1999, 2000, 2C01, 2002 and 2003.

We hold that it is not.

Where a business purpose is established for the gift, pursuant to section 162 the business gift deduction is restricted to $25 per donee per taxable year.

Accordingly, we hold that petitioners are not entitled to exclude from gross income the receipt of payments under Washington's MPC program as foster care payments under section 131 for the years at issue.

Accordingly, we hold that Mr .

While current expenses are deductible pursuant to section 162, section 263 denies a deduction for capital expenditures .

- 50 - as reflected in the regulation, we hold that she is entitled to a deduction for work clothes.under section 162 in the amounts reflected on her worksheets, $797 for 2004.and $1,442 for 2005.

Accordingly, we hold that petitioner underreported his -gross receipts or sales ( i .e ., his self-employment income) on his 2004 Schedule C by $23,755 .

Petitioners contend that pursuant to section 162(a) they are entitled to deduct these purported reimbursements as employee benefit plan expenses .

For the reasons set forth below, we hold for respondent .

Taxpayers are allowededeductions for certain business and investment expenses pursuant to section 162 and 212; however, section 469 generally disailows any passive activity loss for the tax year.

After concessions, the issues for decision are : (i) whether amounts paid by the Nelsons' limited liability companies are deductible, either as fees pursuant to section 162 or as interest expenses pursuant-to section 163 ; and (ii) whether the Nelsons are liable for the accuracy-related penalty pursuant to .-section 6662(a) .

Accordingly, we hold that petitioner is not entitled to vehicle expense deductions beyond those conceded by respondent .

Consequently, we hold.

Breeding and raising horses may be an activity entered into for profit pursuant to section 162.

,Pursuant to section 162(a), a taxpayer is entitled to deduct, , all of the ordinary and necessary unreimbursed busine's's paid or incurred during the taxable year'i(cid:127)n carrying on .

business expenses ..pursuant to section 162 for each year that they : participated in the-.tax'.

Pursuant to section 162(a), a taxpayer is entitled .to-deduct all of the ordinary and necessary business expenses paid or incurred during the taxable year in carrying on a trade or business;.

22 - Therefore, we hold that Mr .

Advertising Expense s In general, advertising expenses to promote a taxpayer's trade or business are deductible pursuant to section 162(a) .

I - 22 - Accordingly, we hold that petitioner's aircraft maintenance activity did not constitute a trade or business or profit seeking activity in 2002 or 2003 .

In 2003 petitioner's fundraising efforts were infrequent and petitioner did not conduct his efforts with the continuity or regularity that section 162 requires .

Accordingly, 'we hold that,Mr .

We hold the payments are deductible becaus e _they.nare ordinary and necessary business expenses .

D OCT - 5 2009 - 2 - certain business expenses under section 162(a) .2 We hold that she is not .

For reasons discussed more fully below, we find that petitioner was not engaged in the activities at issue with the necessary profit objective, and consequently, we hold for respondent .

Accordingly,',we hold that petitioner is entitled to the $1,437 deduction for',2004 .

Beca e we agree with respondent's determination tha t peti oner's Excelix activity was not a trade or business for pure es of section 162, we hold that petitioner is not entitled to t deductions for expenses he claims he incurred with respect to t Excelix activity in 2003 and 2004 .

- 5 - Business expenses are deductible from gross income pursuant to section 162.

Spivey's employment with Amtrak, we find that he did not satisfy the sleep or rest rule, and therefore, we hold that he is not entitled to deduct his meal expenses when he traveled for Amtrak because he does not satisfy the away from home requirement of section 162(a)(2) .

The issue for decision is whether petitioners' unreimbursed employee business expenses claimed on Schedule A, Itemized Deductions, of their 2003 return are deductible pursuant to section 162 .

- 10 - In the light of petitioner's testimony regarding her need to keep patient medical records at home and the aforementioned receipt from Office Max that petitioner provided to the Court, we hold that petitioner is entitled to a deduction of $387 .28 for supplies .

.It is important to note that section 274(h)(7) does not preclude deductions pursuant to section 162 (trade or business expenses) for conventions, seminars, or similar meetings .

Discussion Petitioner contends that the losses relating to the motels and trailer park are deductible pursuant to section 162 .

Petitioner reported the income and expenses from her horse boarding and training activities on Schedule C, Profit or Loss From Business, but concedes that the expenses attributable to the activities are not deductible pursuant to section 162.

In sum, we hold that Robco was an activity conducted for profit in 2002 .

In sum, we hold that Robco was an activity conducted for profit in 2002 .

Pursuant to section 162, expenses relating to the use of an automobile that a taxpayer pays or incurs while commuting between the taxpayer's residence and the taxpayer's place of business or employment are not deductible because such expenses are personal, and not business expenses .

We hold that respondent's determination disallowing petitioner's claimed charitable contribution deduction is sustained .

Section 162 provides that a taxpayer who is carrying on a “trade or business” may deduct ordinary and necessary expenses incurred in connection with the operation of the business.

We hold for petitioner on this issue, as modified by petitioner’s concession at trial.

Pursuant to section 162, a taxpayer must maintain records sufficient to substantiate the amounts of the deductions claimed.

However, pursuant to section 162, a taxpayer may deduct ordinary and necessary expenses paid or incurred during the taxable year in carrying on his or her trade or business.

Section 162 provides that a taxpayer who is carrying on a “trade or business” may deduct ordinary and necessary expenses incurred in connection with the operation of the business.

Section 162 provides that a taxpayer who is carrying on a trade or business may deduct ordinary and necessary expenses incurred in connection with the operation of the business.

Application of Section 3121(b)(20) in Light of Our Interpretation of the Statute and the Regulation We hold petitioner was self-employed under section 3121(b)(20) when he worked as a captain or crew member of the fishing boats in 1997.

Generally, a taxpayer must establish that deductions taken pursuant to section 162 are ordinary and necessary business expenses and must maintain records sufficient to substantiate the amounts of the deductions claimed.

Section 162 provides that a taxpayer who is carrying on a trade or business may deduct ordinary and necessary expenses incurred in connection with the operation of the business.

Generally, a taxpayer must establish that deductions taken pursuant to section 162 are ordinary and necessary business expenses and must maintain records sufficient to substantiate the amounts of the deductions claimed.

Pursuant to section 162(a), a taxpayer may deduct unreimbursed expenses which he actually paid and which were ordinary and necessary expenses of his trade or business.

Generally, a taxpayer must establish that deductions claimed pursuant to section 162 are ordinary and necessary expenses and must maintain records sufficient to substantiate the amounts of the deductions claimed.

Section 162 provides that a taxpayer who is carrying on a trade or business may deduct ordinary and necessary expenses incurred in connection with the operation of the business.

Generally, a taxpayer must establish that deductions taken pursuant to section 162 are ordinary and necessary business expenses and must maintain records sufficient to substantiate the amounts of the deductions claimed.

Generally, a taxpayer must establish that deductions claimed pursuant to section 162 are for ordinary and necessary business expenses and must maintain records sufficient to substantiate the amounts of the deductions claimed.

Generally, a taxpayer must establish that expenses deducted pursuant to section 162 are ordinary and necessary business expenses and must maintain records sufficient to substantiate the amounts of the deductions claimed.

Pursuant to section 162(a), a taxpayer may deduct unreimbursed expenses which he actually paid and which were ordinary and necessary expenses of his trade or business.

Section 162 provides for the deduction of all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Because petitioners did not have net earnings from self- employment within the meaning of section 1402(a), they did not have earned income within the meaning of section 401(c), and, consequently, are not entitled to a deduction for self-employed health insurance expenses for the year in issue pursuant to section 162(l)(2)(A).

162 requires that an item be paid or incurred and the benefit exhausted during the taxable year to be a business deduction.

Petitioner's purported travel expenses are not cost of goods sold but are expenses that would reduce petitioner's income, if at all, as a deduction pursuant to section 162.

Petitioners' Trade or Business Expenses The parties disagree about petitioners' entitlement to deduct, pursuant to section 162, various trade or business expenses.

Accordingly, we hold that these expenditures do not qualify for deduction as "ordinary and necessary" business expenses under section 162(a).

We hold that the banks were not entitled to deduct these expenditures under section 162(a).

Discussion At issue is whether petitioner's costs of removing the asbestos-containing materials are currently deductible pursuant to section 162 or must be capitalized pursuant to section 263 or as part of a general plan of rehabilitation.

In support of its position, petitioner relies on two prior decisions of this Court in which we permitted employers to deduct VEBA contributions pursuant to section 162(a).

The court reasoned that Congress, in enacting section 162(k), did not intend to overrule the “origin of the claim” test for determining whether expenses were deductible under section 162 generally.

Section 183(c) defines an “activity not engaged in for profit” as “any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212.” In general, the Commissioner’s determination set forth in the notice of deficiency is presumed correct.

Menard), or some lesser amount, as officer’s compensation for the taxable year ending January 31, 1998 (TYE 1998); (2) whether Menards is entitled to claim deductions under section 162 of $6,563,548 for the payment of Team Menard, Inc.

Exceptions will be accorded to the “ordinary and necessary” provision of section 162 only when there is explicit legislative indication that such a result was intended.

62(c), providing that a cash payment made by an employer will not qualify as a working condition fringe benefit unless the employer requires the employee to use the payment for “expenses in connection with a specific or pre-arranged activity or undertaking for which a deduction is allowable under section 162 or 167”, verify that the payment was used for such expenses, and return to the employer any part of the payment not so used.

The issue for decision is whether petitioner incurred nondeductible expenses for travel as a form of education within - 2 - the meaning of section 274(m)(2) or whether she had ordinary and necessary employee business expenses for travel and education under section 162.1 Some of the facts have been stipulated and are so found.

However, section 274(d) overrules the so-called Cohan doctrine and provides that no deduction is allowable under section 162 for any traveling expenses, including meals and lodging while away from home, unless the taxpayer complies with strict substantiation rules.

195.9 Section 162 does not allow deductions for otherwise deductible expenses until such time as the trade or business begins to function as a going concern even though the taxpayer may have made a firm decision to enter into business and has expended considerable sums of money in preparation of commencing business. * * * [Jackson v. Commissioner, supra

hown on the tax return. If the books and records are not adequate to establish the amounts of deductions or credits, but there is evidence that something more should be allowed than respondent allowed, then we are required to make some estimate of 5 Sec. 162 provides, in relevant part, as follows: SEC. 162. TRADE OR BUSINESS EXPENSES. (a) In General.--There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or

)(2). - 7 - Prior to 1987, section 1.162-5(d), Income Tax Regs., specifically provided that an individual traveling away from home primarily for educational purposes could properly deduct expenditures for travel, including meals, and lodging under section 162. However, in the Tax Reform Act of 1986, Pub. L. 99- 514, 100 Stat. 2118, section 142(b) of that act expressly overruled section 1.162-5(d), Income Tax Regs. In particular, section 142(b) of the Tax Reform Act of 1986 added section 274(m)(2

§ 162, or nondeductible personal, living, and family expenses, see I.R.C. § 262. Determining whether an expense is for a repair or routine maintenance, or for an improvement or replacement, is a fact- dependent inquiry. See Treas. Reg. § 1.263(a)-3. 7 [*7] 1. Wakefield Property Mr. Pesarik claims that the sale of the Wakefield Property produced a

r profit’ means any activity other than one with respect to which deductions are allowable for the taxable year under section 162 29 [*29] or under paragraph (1) or (2) of section 212.”29 A plain reading of section 183(c) shows that Congress adopted the profit motive standard applicable to section 162 and did not alter it. To the extent one agrees with petitioners’ claim though, we question whether the analysis in Copeland would preclude use of a “tweaked” section 183 profit motive standard in

Section 162 permits taxpayers to deduct all ordinary and necessary business expenses paid or incurred during the taxable year. An ordinary expense is one that commonly or frequently occurs in the taxpayer’s business, Deputy v. du Pont, 308 U.S. 488, 495 (1940), and a necessary expense is one that is appropriate and helpful in carrying on the taxpayer’s business, Commissioner v. Heininger, 320 U.S. 467, 471 (1943); Treas. Reg. § 1.162-1(a). II. Home Office Deduction Generally, section 280A disall

With respect to petitioner's travel between California and New York, in particular, he provided no evidence to establish the business purposes for these - 14 - [*14] trips, and there is no way to distinguish whether any trip was made primarily for a business purpose or a personal one, e.g., to visit his son. Accordingly, because petitioner did not meet the strict substantiation requirements under section 274(d), we will sustain respondent's determination that his travel expenses are not deducti

A taxpayermay deduct the cost ofhome Internet service pursuant to section 162 if the expense is ordinary and necessary in the taxpayer's trade or business. See Fessey v. Commissioner, T.C. Memo. 2010-191. To the extent that the taxpayer's home Internet expense is attributable to nonbusiness use, it constitutes a nondeductible personal expense. See sec. 262(a); Fessey v. Commissioner, T.C. Memo. 2010-191. We have previously characterized Internet expenses as utility expenses. Verma v. Commissione

Moreover, in the spreadsheets petitioner seems to have haphazardly compiled both sales and purchases, and we are unable to distinguish the ones from the others. We do not accept petitioner's spreadsheets as credible evidence ofcosts ofgoods sold. Accordingly, we conclude that petitionerhas failed to carry his burden ofproving that he is entitled to the claimed costs ofgoods sold. Upon the basis ofthe foregoing, we sustain respondent's determinations in the notice ofdeficiency that petitioner is

Section 162 does not, however, permit current deductions for startup or preopening expenses incurred by taxpayers before beginning business operations. Sec. 195(a); Johnsen v. Commissioner, 794 F.2d 1157, 1160 (6th Cir. 1986), rev'g 83 T.C. 103 (1984). "[T]o be engaged in a trade or business, the taxpayermust be involved in the activity with contin

At trial, petitioner argued that he is entitled to deductions or losses under section 162, 165, or 212 on the basis of a blended (average) takeout rate of 19% as applied to his wagers for the years at issue.

Specialty Rests. Corp. v. Commissioner, T.C. Memo. 1992-221. In Specialty Rests. Corp., the taxpayer (a parent corporation) incurred startup costs for its subsidiary restaurants. On its tax return, the taxpayer deducted these preopening costs under section 162. We rejected the taxpayer’s position, finding that the subsidiaries were separate legal entities. We thus held that the expenses were preopening expenses of the subsidiaries and represented capital contributions by a parent corporation to

97 for taxable year 2008, see infra app. C. Petitioner's Wells Fargo account records also evidence additional substantiated expenses of$4,269.38 for taxable year 2006. See infra app. D.8 Petitioner may correspondingly deduct these amounts pursuantto section 162. 8Petitioner submitted a Wells Fargo account check register for his taxable year 2007 which superficially demonstrates that he made certain expenditures during that year; however, the corresponding canceled checks were not offered into ev

hasis added). So the question comes down to whether in " We note again the standard is "any use in a trade or business," sec. 280F(d)(6)(B), which isn't the same as the "ordinary and necessary" standard generally required ofbusiness deductions under section 162. We have also held that "[n]owhere in the language ofsection 168 is there a suggestion that availability ofthe depreciation deduction is dependent on the satisfaction ofthe requirements ofsection 162. There simply is no requirement that t

The term “trade or business” “shall have the same meaning as when used in section 162 (relating to trade or business expenses)”.

Also, she is not entitled to a depreciation and/or section 179 expense deduction because she did not adequately distinguish between personal use and business use with respect to the items to which those deductions relate, and we . have insufficient infor n tion to formulate a reasonable allocation between use that would allow for a deduction and use that would not. See sec. 262; Vanicek v. Commissioner, 85 T.Q. 731, 742-743 (1985). Petitioner claim that expenses incurred during 2003 and 2004 ar

Section 274(c)(1) provides that no deduction (otherwise allowable under section 162) shall be allowed for that portion ofthe expenses attributable to travel outside the United States which, under regulations prescribed by the Secretary, is not allocable to the taxpayer's trade or business.

Also, she is not entitled to a depreciation and/or section 179 expense deduction because she did not adequately distinguish between personal use and business use with respect to the items to which those deductions relate, and we . have insufficient infor n tion to formulate a reasonable allocation between use that would allow for a deduction and use that would not. See sec. 262; Vanicek v. Commissioner, 85 T.Q. 731, 742-743 (1985). Petitioner claim that expenses incurred during 2003 and 2004 ar

Also, she is not entitled to a depreciation and/or section 179 expense deduction because she did not adequately distinguish between personal use and business use with respect to the items to which those deductions relate, and we . have insufficient infor n tion to formulate a reasonable allocation between use that would allow for a deduction and use that would not. See sec. 262; Vanicek v. Commissioner, 85 T.Q. 731, 742-743 (1985). Petitioner claim that expenses incurred during 2003 and 2004 ar

ioner v. Court Holding Co., 324 U.S. 331 (1945), and because the transfer ofthe Tele2000 shares served no business purpose. Finally, respondent determined that petitioner failed to - 28 - [*28] substantiate various trade and business expenses under section 162. On December 9, 2009, petitionertimely filed the petition in docket No. 29268-09. C. Notice ofDeficiency (Docket No. 5044-10) On December 10, 2009, respondent issued petitioner a notice ofdeficiency which determined Federal income tax defi

Petitioner's wagering expenses thus come within the description of both section 162(a) and section 165(d). See, e.g., iBoyd v. United States, 762 F.2d 1369, 1372-1373 (9th Cir. 1985); Nitzberg v. Commissioner, 580 F.2d 357, 358 (9th Cir. 1978), revg. T.C. Memo. 1975-154 and T.C. Memo. 1975-228; Offutt v. Commissioner, 16 T.C. 1214, 1215 (1951); Crawford v. Commissioner, T.C. Memo. 2010-54; Valenti v. Commissioner, T.C. Memo. 1994-483. Petitioner contends that under Commissioner v. Groetzinger, 4

Car and Truck Expenses Under section 162(a) an employee or selfremployed taxpayer may deduct the cost of operating an automobile to the extent it is used in a trade or business. However, under section 262, no portion of the cost of operating an automobile that,is attributable to personal use is deductible. A passenger vehicle is listed property under section 280F(d) (4) and subject to strict substantiation under section 274(d). The rule in Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930), does

Instead, the issue decided in Groetzinger was whether the taxpayer’s gambling activities constituted engagement in a trade or business under section 162 “for purposes of treating his gambling losses as a tax preference item under the minimum tax scheme governed by sections 55 and 56.” Valenti v.

Furthermore, she claims that ..section 162 does not require that she demonstrate how much of the mobile home rent was allocable to a bed-and-breakfast business as opposed to the couple's personal expenses .

29, which is materially distinguishable . Petitioners may retrieve their underlying insurance policies from Benistar Plan at no or low cost . The revenue ruling gives no indication that th e employees could retrieve their underlying insurance policies from the group employee benefit trust . Thus, as in Moser v. Commissioner, supra, the revenue ruling does not consider whether contributions in excess of those required to cover the current cost might be construed as a distribution to the taxpayer

stances of these . cases, exploration of the intricacies of section 419 would not be productive and might be misleading as applied to future cases where the benefits provided did not so clearly exceed ordinary and necessary expenses deductible under section 162 . Because we do not interpret section 419A(f)(6), we do not address petitioners' contention that section 1 .419A(f)(6)-l, Income Tax Regs ., is. invalid . - - 31 - Retroactive Amendments to Benistar Plan As a preliminary matter, we note t

Furthermore, she claims that ..section 162 does not require that she demonstrate how much of the mobile home rent was allocable to a bed-and-breakfast business as opposed to the couple's personal expenses .

situations involved, the courts have not formulated a concrete definition of the term lióme’ capable of universal application.” This case [Brandi v. Commissioner] is inapposite to the facts herein because it involves the meaning of “tax home” under I.R.C. § 162 for purposes of deducting traveling expenses, such as meals and lodging by salesmen who travel and stay overnight from their “tax home” which can be their principal place of business in some situations. On brief, respondent also asserts:

disagree with petitioners that the so-called mandatory indemnification provisions in the incorporation documents and Hawaiian statute make any of the still disputed professional fees deductible under section 162(a) . First, even if Michael Boulware was entitled to the claimed mandatory indemnification, the compulsory character of a payment does not ensure that it i s 75( . . . continued) sec . 414-483, supra , petitioners limit their arguments to the earlier two provisions stating that the lates

162(a), including "travel- ing expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business", sec . 162(a)(2) . For a taxpayer to be considered "away from home" within the meaning of section 162(a)(2), the taxpayer must be on a trip that requires the taxpayer to stop for sleep or a substantial period of rest. See United States v . Correll , 389 U.S . 299 (1967) ; S

acquisition of itsas entitled-to deduct those expenses because, unlike the#taxpayerse,=- in INDOPCO, Inc.. , it was acquired in a hostile", ..takeover. We . declined-to decide whether INDOPCO, Inc . ,`:required capitalization of expenses incurred incident, to a hostile takeover,{however, because we concluded that the .nature of the takeover in victory Mkts . was not,.hostile .and :that .the facts .. were generally indistinguishable from those in INDOPCO ; .Inc . C. United:States-v .,Federated De

The District Court sustained the bankruptcy court’s holdings that deductions were allowable under either section 162 or section 165.

- 12 - Section 162(k) provides:¹ SEC. 162(k). Stock Redemption Expenses.-- (1) In general.--Except as provided in paragraph (2), no deduction otherwise allowable shall be allowed under this chapter for any amount paid or incurred by a corporation in connection with the redemption of its stock. (2) Exceptions.--Paragraph (1) shall not apply to-- (A) Certain specific deductions.--Any-- (i) deduction allowable under section 163 (relating to interest), or (ii) deduction for dividends paid (within th

The Commissioner argued that the taxpayer could have leased directly from the owners and that consequently the amounts paid under the sublease to the shareholder partnership that exceeded what the partnership paid under the primary lease was not rent for purposes of section 162(a)(3). This Court concluded that the additional amounts paid under the sublease served to compensate the shareholders for their assumption of risk and that these amounts were deductible as rent so long as they did not exc

Section 162(a) generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business .6 The determination of whether an expenditure satisfies the requirements for deductibility under section 162 is a question of fact .

While section 162 allows a corporate taxpayer to deduct the ordinary and necessary expenses of its business, the mere fact that petitioner's wife may have been unable to work for the S corporations unless daycare was provided to her children does not necessarily mean that the payment of petitioners' daycare expenses is an ordinary and necessary expense o

For purposes of section 162, the term “home” generally means the taxpayer’s principal place of employment and not where his or her personal residence is located.

Statutory Framework Section 162 allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Furthermore, unlike in Beech Trucking Co., petitioners in this case, as noted above, attempted to substantiate the drivers’ travel expenses. We must consider whether this evidence meets the requirements of section 274(d). Additionally, petitioners here argue that they are entitled to a 100-percent deduction for the portion of the per diem allowance that they estimate is allocable to nonmeal expenses. I. Whether Petitioners May Deduct 80 Percent of the Per Diem Allowance Paid to Continental’s Dri

Petitioners have not argued that this deduction falls under section 162 as an ordinary and necessary business expense, so we rely on the general principle that a deduction for property forfeited under Federal or State forfeiture laws, if allowed at all, falls under the loss deduction provisions of section 165.

any goods were disposed of by the venture, and because the parties did not distinguish at trial or on brief between the various components of the Shrike Cars loss, we shall treat the $374,885 amount as a claim for additional business expenses under sec. 162. See Keegan v. Commissioner, T.C. Memo. 1997-511 (considering reported cost of goods sold to be a claim for sec. 162 expenses). - 5 - ($232,490), taxable income of $0, and a refund amount due of $33,600 from withholdings.3 On June 18, 2002,

Statutory Framework Section 162 allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Statutory Framework Section 162 allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Statutory Framework Section 162 allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Statutory Framework Section 162 allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Respondent determined that (1) Hillside Dairy failed to establish that the food and lodging expenses were ordinary and necessary business expenses under section 162 and (2) those items were the Schmidts’ personal expenses.

n calculating net earnings from self-employment, we first consider whether petitioners carried on a trade or business during the years at issue. The term “trade or business” has the same meaning for purposes of section 1402 as it has for purposes of section 162. Sec. 1402(c). “Trade or business” under section 162 has been interpreted to mean an activity that is conducted “with continuity and regularity” and with the primary purpose of making income or a profit. Commissioner v. Groetzinger, 480 U

In general, section 162 allows petitioners’ corporations to deduct amounts paid as corporate employment taxes (Federal income, FICA, and FUTA taxes).6 See sec.

Although an “intent to compensate” requirement has been applied by the courts in numerous cases, the instant situation is factually distinguishable from the situation in those cases which involved corporate payments to shareholders or employees in positions of control. E.g., Paula Constr. Co. v. Commissioner, 58 T.C. 1055, 1058-1059 (1972), affd. without published opinion 474 F.2d 1345 (5th Cir. 1973). In the context of corporate payments to shareholders, careful scrutiny is required to determin

'Car and Truck Expenses In addition to satisfying the criteria for deductibility under section 162, certain categories of expenses must also satisfy the strict substantiation requirements of section 274(d) in order for a deduction to be allowed.

It is not enough to establish that expenditures are incurred in carrying on a trade or business to qualify for a deduction under section 162--all of the requirements set out above [namely, the five requirements for deductibility set forth in Commissioner v.

It is not enough to establish that expenditures are incurred in carrying on a trade or business to qualify for a deduction under section 162--all of the requirements set out above [namely, the five requirements for deductibility set forth in Commissioner v.

Where an activity does not possess the characteristics of a trade or business within the meaning of section 162, such as when an organization sends out low-cost articles incidental to the solicitation of charitable contributions, the unrelated business income tax does not apply since the organization is not in competition with taxable organizations.

ater portion of an employee’s daily expenses. Further, under American’s logic, $22 of this amount would include incidental expenses, and the burden is upon American to prove that such an amount would meet the “ordinary and necessary” requirement of I.R.C. § 162. American argues that even if it cannot meet the substantiation requirements of § 274(d), American’s covered meals and incidental expenses allow- The facts at hand present a challenging question because petitioner does not fit within eith

n to tax under sec. 6651(a) for 1993, except insofar as our redetermination of the deficiency for that year reduces or eliminates the base for calculation of this addition to tax. Petitioner also concedes that she is not entitled to deductions under sec. 162. Respondent concedes that, if petitioner’s expenditures are qualitatively deductible, then the amounts that petitioner deducted are the correct amounts. In the pleadings respondent suggested, and in the opening statement respondent plainly c

Second, unlike the taxpayer in Henderson v. Commissioner, supra, petitioner would have incurred a substantial out-of-pocket duplication of lodging and meal expenses while he worked but for the fact that his employer furnished him with those items at no charge. Had petitioner’s employer not done so, petitioner would have incurred the duplicative out-of-pocket expenses which respondent argues are necessary for a finding of a tax home. Contrary to respondent’s assertion, we do not believe that a fi

Various Schedule C Expenses Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. The term "trade or business" is not defined with particularity in the Internal Revenue Code or the regulations promulgated thereunder for purposes of section 162. However, it is well established that to be involved in a trade or business within the meaning of section 162, "the taxpayer must be involved in the activity with continuity and regularity and * * * the taxpayer's primary purpose for enga

Section 162 does not, however, allow a taxpayer to deduct travel expenses attributable to personal, living, or family expenses. See sec. 262. Nor does section 162 allow a taxpayer to deduct travel expenses absent either compliance with the substantiation requirements of section 274(d) or the fulfillment of criteria set forth by the Commissioner as

We therefore hold that petitioner is not entitled to claim expenses incurred in putting the Officer O'Smarty issue on the November 1993 ballot as section 162 deductions on his 1993 Federal income tax return.

We believe that the authorities under section 162 do not undermine our conclusion that “home” requires a residential connection for purposes of section 131.

Section 274(d) provides that no deduction under section 162 or 212 for travel and meals and entertainment is allowed unless the taxpayer substantiates by adequate records or by sufficient evidence (A) the amount of the expense, (B) the time and place of the travel or entertainment, (C) the business purpose of the expense, and (D) the business relationship to the taxpayer of persons entertained.

ONER OF INTERNAL REVENUE, Respondent Docket No. 3796-95. Filed July 8, 1998. P is the common parent of an affiliated group of corporations making a consolidated return of income. M1, a member of the affiliated group, claimed a deduction pursuant to sec. 162, I.R.C., for graphic design expenditures relating to cigarette package designs. M2, another member of the affiliated group, reported a portion of an international arbitration award that it received as an amount realized on the sale or other d

Deductibility of Attorney's Fees Under Section 162 In the notice of deficiency, respondent allowed petitioners a deduction under sections 212(1) and 265 for legal fees allocable to the taxable portion of the settlement proceeds.

Section 162 allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Section 170 allows a deduction for any charitable contribution or gift, as defined therein, paid 9 in the taxable year. In order to be fully deductible under section 512(a), petitioners' claimed items

Petitioner deducted the cost of the asphalt as a supplies expense under section 162 and section 1.162-3, Income Tax Regs.

Whether Petitioners May Deduct the Settlement Payment under Section 162 Petitioners argue in the alternative that they may deduct under section 162 their payments to settle the Northeast litigation and the adversary proceeding.

Section 162 allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Section 170 allows a deduction for any charitable contribution or gift, as defined therein, paid 9 in the taxable year. In order to be fully deductible under section 512(a), petitioners' claimed items

(2) Whether pursuant to section 162, petitioner may claim unreimbursed business expense deductions in excess of the amounts allowed by respondent for the taxable years in issue.

percent of the interest paid in 1989 and 10 percent of the interest paid in 1990 as a deduction under the phase-in provisions of section 163(h)(5).1 Petitioners assert that the amount of the interest expense which they have calculated as being attributable to Carrier Communications is an ordinary and necessary expense of a trade or business under section 162, deductible in computing adjusted gross income under section 62(a), and is therefore not personal interest under section 163(h).

ment and consulting fees are reasonable payments for services rendered; (2) whether the - 7 - franchise transactions petitioners entered into were bona fide so that petitioners are entitled to deduct royalty payments, or whether an adjustment under section 162 or 482 is warranted; (3) whether amounts petitioners deducted as interest and guarantee fees were associated with bona fide debt; (4) whether amounts petitioners deducted as interest in section 351 transactions were associated with debt; (

("A deduction for an expense * * * which would otherwise be allowable under section 162 shall not be denied on the grounds that allowance of such deduction would frustrate a sharply defined public policy");1 see also S.

e taxpayer's trade or business. Carbine v. Commissioner, 83 T.C. 356, 363 (1984), affd. 777 F.2d 662 (11th Cir. 1985); Heineman v. Commissioner, 82 T.C. 538, 543 (1984). Only the portion of an expense that is reasonable in amount is deductible under section 162. United States v. Haskel Engg & Supply Co., 380 F.2d 786, 788- 789 (9th Cir. 1967). Petitioners deducted $5,020 for membership fees and expenses in Gull Lake Country Club. Mr. Martin was an active member of the country club from July to D

e taxpayer’s trade or business. Carbine v. Commissioner, 83 T.C. 356, 363 (1984), affd. 777 F.2d 662 (11th Cir. 1985); Heineman v. Commissioner, 82 T.C. 538, 543 (1984). Only the portion of an expense that is reasonable in amount is deductible under section 162. United States v. Haskel Engineering & Supply Co., 380 F.2d 786, 788-789 (9th Cir. 1967). Pursuant to section 262(a), personal, living, or family expenses may not be deducted, except as otherwise expressly provided in the Code. Furthermor

ment and consulting fees are reasonable payments for services rendered; (2) whether the - 7 - franchise transactions petitioners entered into were bona fide so that petitioners are entitled to deduct royalty payments, or whether an adjustment under section 162 or 482 is warranted; (3) whether amounts petitioners deducted as interest and guarantee fees were associated with bona fide debt; (4) whether amounts petitioners deducted as interest in section 351 transactions were associated with debt; (

ment and consulting fees are reasonable payments for services rendered; (2) whether the - 7 - franchise transactions petitioners entered into were bona fide so that petitioners are entitled to deduct royalty payments, or whether an adjustment under section 162 or 482 is warranted; (3) whether amounts petitioners deducted as interest and guarantee fees were associated with bona fide debt; (4) whether amounts petitioners deducted as interest in section 351 transactions were associated with debt; (

ment and consulting fees are reasonable payments for services rendered; (2) whether the - 7 - franchise transactions petitioners entered into were bona fide so that petitioners are entitled to deduct royalty payments, or whether an adjustment under section 162 or 482 is warranted; (3) whether amounts petitioners deducted as interest and guarantee fees were associated with bona fide debt; (4) whether amounts petitioners deducted as interest in section 351 transactions were associated with debt; (

Petitioners assert that the amount of the interest expense which they have calculated as being attributable to Carrier Communications is an ordinary and necessary expense of a trade or business under section 162, deductible in computing adjusted gross income under section 62(a), and is therefore not personal interest under section 163(h).

etitioner contends that he possessed the requisite profit objective during the years at issue and, therefore, section 183 is inapplicable. Accordingly, petitioner argues that the expenses attributable to his horse activity are fully deductible under section 162. We agree with petitioner. Section 183 allows only specified deductions unless an activity is engaged in for profit. Section 183(c) defines an activity not engaged in for profit as any activity other than one with respect to which deducti

ax Regs., provides in pertinent part: Expenses incurred in traveling away from home (which include transportation expenses, meals, and lodging) and any other transportation expenses are not deductible unless they qualify as expenses deductible under section 162 * * * (relating to trade or business expenses), section 170 * * * (relating to charitable contributions), section 212 * * * (relating to expenses for production of income), section 213(e) * * * (relating to medical expenses), or section 2

at 591, we pointed out that “It is essential to recognize the balance which must be maintained between section 162 on the one hand and sections 262 and 263 on the other hand in deciding the deductibility of educational expenses.” When the facts show that a taxpayer undertook education to meet the minimum educational requirements of a new position with his employer, it follows that the educational expenses are not the ordinary and necessary expenses

However, under section 183(a), taxpayers may not deduct expenses for an activity “if such activity is not engaged in for profit.”2 When a partnership is involved in a section 183 analysis, the existence of the requisite profit objective is determined at the partnership level. Brannen v. Commissioner, 78 T.C. 471, 505 (1982), aff’d, 722

A taxpayer, to be engaged in a trade or business for purposes of section 162, must be involved in the activity with continuity and regularity and the taxpayer’s primary purpose for engaging in the activity must be for income or profit.

deral tax purposes. Punitive damage awards are not an inherent component of insurance underwriting and can arise in many contexts. Ordinary and necessary expenses of an insurance company are generally allowable under section 832(c)(1) as provided in section 162. There is no reason to presume that Congress intended that section 832(b)(5) be the applicable section to determine tax deductions for punitive damage awards. To adopt petitioner’s position would require that its contingent liability for

Unreimbursed Employee Expenses Section 162 (a) allows a taxpayer a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business, including a trade or business as an employee, subject to the limitation that a taxpayer is allowed a deduction for miscellaneous itemized deductions only to the extent that they exceed 2 perc

ether petitioner received additional unreported constructive dividends during 1988, 1989, and 1990 of $11,233, $20,439, and $8,060, respectively, from the personal use of the corporation’s property; (3) whether petitioner is entitled to deduct under section 162,1 as expenses of an unincorporated beauty shop business of which he was a proprietor, payments of $11,500 in 1989 and 1 Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue,

from any trade or business carried on by the taxpayer. Secs. 1401(a), 1402(a) and (b); sec. 1.1401-l(a), Income Tax Regs. The term “trade or business” has the same meaning under section 1402(a), defining “net earnings from self-employment”, as under section 162. Sec. 1402(c); Bot v. Commissioner, 118 T.C. 138, 146 (2002), affd. 353 F.3d 595 (8th Cir. 2003). “Trade or business” under section 162 has been interpreted to mean an activity conducted “with continuity and regularity” and with the prima

The issues are whether petitioner is (1) entitled to a deduction under section 162 for educational expenses, (2) entitled to an exemption under Article 21 of the Convention for the Avoidance of Double Taxation, Oct.

Statutory Framework Section 162 allows a deduction for all ordinary and necessary expenses incurred during the taxable year in carrying on a trade or business.

Petitioner, however, contends that under section 162 the legal fee was an ordinary and necessary expense that was incurred in carrying on a trade or business.

e disputed expense categories. B. Landscaping (“Advertising” Expense) Petitioners argued that the entire landscaping expense, incurred primarily to install landscaping near and surrounding Mr. and Mrs. Dobbe’s residence, was properly deducted under section 162. According to petitioners, the new landscaping was necessary to improve the “first impression” of Holland America’s - 18 - business and allowed Holland America to display and promote its products to the public. Respondent contends the majo

Section 183(c) defines an activity not engaged in for profit as “any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of 2 Because we find that petitioners’ Schedule C activities were not engaged in or carried on for profit, we need not decide respondent’s alternative position that petitioners’ Schedule C losses were passive activity losses subject to the limitations imposed under sec.

be no different even if petitioners had shown that the expenses were capital contributions to Cost Less. Petitioners have not substantiated the expenses or shown that those expenses were ordinary and necessary expenses of Cost Less as required under section 162. To the extent that petitioner paid for meals, petitioners have failed to show that they complied with section 274(d). We conclude that neither Cost Less nor petitioners may deduct these amounts. E. Negligence Petitioners contend that the

The term "trade or business" is not precisely defined in the Internal Revenue Code or the regulations promulgated thereunder; however, it is well established that in order for an activity to be considered a taxpayer's trade or business for purposes of section 162, the activity must be conducted "with continuity and regularity" and "the taxpayer's primary purpose for engaging in the activity must be for income or profit." Commissioner v.

Audit History Services Group and its affiliates claimed deductions for payments, directly or indirectly, to Hanseatic, Norwesco, Executive, and Eagle as insurance premiums under section 162 in the years paid.

cellaneous expenses. Petitioners conclude with respect to their alternative argument that they may deduct the $497,667 amount as: (1) An ordinary and necessary expense in carrying on Mr. Syphrett's trade or business as an employee of Intrastate, see sec. 162, or (2) an expense for the production or collection of income, or the management, conservation, or maintenance of property held for the production of income, see sec. 212. Respondent counters that all of the settlement proceeds belonged to p

The issue for decision is whether petitioners are entitled to deduct various costs - 2 - incurred in connection with their construction and attempted sale of a house under section 162.1 FINDINGS OF FACT Oral stipulations were made at trial.

To be entitled to a business expense deduction for consulting fees under section 162, petitioner must prove that the expenses were: (1) Ordinary and necessary, (2) paid or incurred in carrying on a trade or business, (3) incurred during the taxable year in which the taxpayer seeks to deduct them, and (4) paid by the person to whom the services were rendered.

ith continuity and regularity and * * * the taxpayer's primary purpose for engaging in the activity must be for income or profit." Commissioner v. Groetzinger, supra at 35. The ownership of stocks and bonds is not generally a trade or business under section 162. Higgins v. Commissioner, 312 U.S. 212 (1941)(managing securities investments and collecting income therefrom generally is not a trade or business, regardless of the amount invested, continuity of effort, or amount of time devoted to the

, Judge: Respondent determined deficiencies in petitioner’s income tax for the taxable years 2004 and 2005. The issue for decision is whether payments petitioner made to shareholders to delay redemption of their preferred shares are deductible under section 162 or 163. For the reasons stated herein, we find that the payments are deductible in part under section 162. Background Some of the facts have been stipulated and are so found. Petitioner is a Delaware corporation whose principal place of b

Petitioners rely on section 162 and section 1.162-1, Income Tax Regs., as substantial authority for taking their deductions; however, given the particular circumstances of this case, we cannot agree that those authorities represent substantial authority for petitioners' deductions.

but not “recurring in nature”. Petitioner argues the regulation does not restrict its right to deduct such a nonrecurring expense because the text provides explicitly for deduction of “any” expense that satisfies the “ordinary and necessary” test of section 162. Respondent argues the regulation is read more narrowly to permit deduction of only “administrative” expenses which are ordinary and necessary and recurring in nature. Respondent relies on Rev. Rul. 86-142, 1986-2 C.B. 60, to support this

re actively engaged in a trade or business for purposes of section 162(a). It is clear to us that different criteria are taken into account in making such determinations. For example, a profit motive is necessary to support a deduction claimed under section 162. Nothing in the record suggests that a profit motive is necessary to qualify for CRP payments. Furthermore, the fact that the Commissioner ultimately concedes all or part of a case is not sufficient to establish that the Commissioner’s po

respective fair market values of those cores are the cost and the market for purposes of section 471 and that the alleged excesses over such cost and market that Consolidated credited to each customer account receivable are deductible expenses under section 162. In support of respondent’s position that Consolidated’s FIFO-LCM method does not clearly reflect income, respondent contends that Consolidated acquired customer cores in purchase, and not exchange, transactions and that therefore the cos

- 27 - DCI paid that amount to the Diamonds as a dividend.16 The parties frame the central issue that we must resolve as necessarily implicating section 162.17 We assume that that is because, in its return for the year at issue, DCI included in its gross income all the proceeds of the Farmers lawsuit and deducted as "CONTRACT SERVICES" $450,245.

Whether an expenditure satisfies the requirements of section 162 is a question of fact.

Court REVIEWED 165 T.C. No. 10 SUNIL S. PATEL AND LAURIE MCANALLY PATEL, ET AL.,1 Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent ————— Docket Nos. 24344-17, 11352-18, Filed November 12, 2025. 25268-18. ————— Ps claimed deductions under I.R.C. § 162 on their 2013, 2014, 2015, and 2016 tax returns for amounts paid to purported captive insurance companies A and B and to entity C, which purported to reinsure a portion of A and B’s risk. R denied the deductions and determined that Ps ar

Section 162 allows a taxpayer to deduct all ordinary and necessary expenses paid or incurred during a taxable year in carrying on a trade or business. § 162(a); Treas. Reg. § 1.162-1(a). Generally, if a taxpayer demonstrates that he or she has actually incurred a deductible expense but is unable to adequately substantiate the amount, the Court shou

Unreimbursed Employee Business Expenses Section 162 generally allows a taxpayer to deduct all ordinary and necessary expenses paid or incurred by the taxpayer in carrying on a trade or business.

tates Tax Court T.C. Memo. 2024-34 SUNIL S. PATEL AND LAURIE MCANALLY PATEL, ET AL.,1 Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent ————— Docket Nos. 24344-17, 11352-18, Filed March 26, 2024. 25268-18. ————— Ps claimed deductions under I.R.C. § 162 on their 2013, 2014, 2015, and 2016 tax returns for amounts paid to purported captive insurance companies A and B and to entity C, which purported to reinsure a portion of its risk with A and B. R denied the deductions and determined tha

4 Section 162(a) permits a deduction for ordinary and necessary expenses paid or incurred during the taxable year “in carrying on any trade or business.” An expense is deductible under section 162 only if it is paid or incurred while the taxpayer is “carrying on” a trade or business, not before.

Schedule C Expenses Section 162 allows a deduction for ordinary and necessary business expenses, but taxpayers have the burden of proving what they spent.

For-Profit Business Section 162 generally allows deductions for ordinary and necessary business expenses incurred in carrying on a trade or business.

Advertising “[A]dvertising and other selling expenses” that “pertain to the taxpayer’s trade or business” are generally deductible under section 162 as an “ordinary and necessary” expense.

n rush-hour traffic in Los Angeles, this may well have been a rational choice, but it was a personal choice. It is well established that the expenses of commuting to and from work are not “ordinary and necessary” business expenses deductible un- der section 162. Fausner v. Commissioner, 413 U.S. 838, 838–39 (1973); Commissioner v. Flowers, 326 U.S. 465, 470 (1946); Feistman v. Com- missioner, 63 T.C. 129, 134–35 (1974); Treas. Reg. §§ 1.162-2(e), 1.262- 1(b)(5). That is because the decision abou

on Schedule C. Rather, respondent contends only that petitioners have failed to meet the strict substantiation requirements of section 274(d) with respect to certain reported Schedule C expenses that would otherwise be allowable as a deduction under section 162. 11 [*11] estimate a deductible expense, the Court must have a basis upon which an estimate may be made. Vanicek v. Commissioner, 85 T.C. 731, 742–43 (1985). Estimates may not be made under Cohan in situations where section 274 imposes st

- 123 - [*123] The Court of Appeals held that the expenses the taxpayer incurred to defend itself from the takeover were deductible under section 162 and those incurred to find alternative transactions to the takeover were deductible under section 165(a).203 Petitioners also cite Santa Fe Pac.

- 18 - [*18] section 162 is a question of fact.

t may be considered.” Maggie Mgmt. Co. v. Commissioner, 108 T.C. at 443. II. Application to the Motion For both the 2014 and 2015 tax years, the burden was on Mr. Jacobs to establish that his expenses met all the requirements for deductibility under section 162. See Rule 142(a); Frost v. Commissioner, 154 T.C. 23, 29 (2020); see also INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). When the Commissioner filed his answer on June 2

Where section 162 and section 263 each apply to a given expenditure, the capitalization requirement controls and functions to bar the deduction. See sec. 161; see also Commissioner v. Idaho Power Co., 418 U.S. 1, 17-18 (1974). The “primary effect” of a payment’s classification as a deductible business expense or nondeductible capital expenditure is seen

Whether an expense is deductible under section 162 is essentially a question of fact.

Where section 162 and section 263 each apply to a given expenditure, the capitalization requirement controls and functions to bar the deduction. See sec. 161; see also Commissioner v. Idaho Power Co., 418 U.S. 1, 17-18 (1974). The “primary effect” of a payment’s classification as a deductible business expense or nondeductible capital expenditure is seen

Whether an expenditure satisfies the requirements for deductibility under section 162 generally is a question offact.

Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Sec. 162(a); sec. 1.162-1(a), Income Tax Regs. An expense is "ordinary" ifit is "normal, usual, or customary" in the taxpayer's trade or business or it arises from a transaction "ofcommon or frequen

Expenses incurred for traveling between two or more places ofbusiness may be deductible as ordinary and necessary business expenses - 11 - under section 162 ifincurred for business reasons.

Even ifan expense is ordinary and necessary, it is deductible under section 162 only to the extent it is reasonable in amount.

Whether an expenditure satisfies the requirements for deductibility - 9 - [*9] under section 162 is a question offact.

A prerequisite to claiming deductions under section 162 is that the expenses directly relate to an active trade or business at the time the expenses were incurred.

Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. See sec. 162(a); sec. 1.162-1(a), Income Tax Regs. Generally, the performance of services as an employee constitutes a trade or business. Primuth v. Commissioner, 54 T.C. 374, 377 (1970). Unreimburs

Clothing costs are deductible as ordinary and necessary business expenses under section 162 only ifa taxpayer proves that: "(1) the clothing is ofa type specifically required as a condition of employment, (2) it is not adaptable to general usage as ordinary clothing, and (3) it - 14 - is not so worn." Pevsner v.

Generally, a taxpayer must establish that deductions claimed under section 162 are ordinary and necessary business expenses, and the taxpayermust maintain records to substantiate the deductions claimed.

To be entitled to deductions under section 162, SoBe must have entered into the music business with the "actual and honest objective ofmaking a profit." Osteen v.

Generally, a taxpayer must establish that deductions claimed under section 162 are ordinary and necessary business expenses, and the taxpayermust maintain records to substantiate the deductions claimed.

This does not mean, however, that a C corporation cannot lease home office space from an employee (or from its owner); instead the rules under section 162 apply to such a lease arrangement where the C corporation is concerned.

Generally, a taxpayer must establish that deductions claimed under section 162 are ordinary and necessary business expenses, and the taxpayermust maintain records to substantiate the deductions claimed.

"Until that time, expenses related to that activity are not 'ordinary and necessary' expenses currently deductible under section 162 * * * but rather are 'start-up' or 'pre-opening' expenses." See Woody v.

Clothing costs are deductible as ordinary and necessary business expenses under section 162 only ifa taxpayerproves that "(1) the clothing is ofa type specifically required as a condition ofemployment, (2) it is not adaptable to general usage as ordinary clothing, and (3) it is not so worn." Pevsner v.

It is not a deduction and is not subject to the limits on deductions in section 162, Metra Chem.

Generally, a taxpayer must establish that deductions claimed under section 162 are ordinary and necessary business expenses, and the taxpayermust maintain records to substantiate the deductions claimed.

-6- for deductibility under section 162 is a question offact.

Section 162 Deduction Section 162(a) permits a deduction for the ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. The term "'paid or incurred' * * * shall be construed according to the method of accounting upon the basis ofwhich the taxable income is computed under subtitle A." Sec. 7701(a

Section 262 expressly denies a deduction for "personal, living, or family expenses." On the other hand, under section 162, a taxpayer may deduct unreimbursed employee business expenses as an ordinary and necessary business expense.

- 8 - requirements under section 162 as well as the specific requirements under the regulations.

ORNA AVRAHAMI, Petitioners y. COMMISSIONER OF INTERNAL REVENUE, Respondent FEEDBACK INSURANCE COMPANY, LTD., Petitionery. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket Nos. 17594-13, 18274-13. Filed August 21, 2017. Ps claimed deductions under I.R.C. section 162 on their 2009 and 2010 tax returns for amounts paid by their passthrough entities to captive insurance company C wholly owned by PW and to off-shore company A which reinsured a portion ofits risk with C. R denied the deductions and

ORNA AVRAHAMI, Petitioners y. COMMISSIONER OF INTERNAL REVENUE, Respondent FEEDBACK INSURANCE COMPANY, LTD., Petitionery. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket Nos. 17594-13, 18274-13. Filed August 21, 2017. Ps claimed deductions under I.R.C. section 162 on their 2009 and 2010 tax returns for amounts paid by their passthrough entities to captive insurance company C wholly owned by PW and to off-shore company A which reinsured a portion ofits risk with C. R denied the deductions and

"An expenditure generally does not have independent and substantial importance to the distributing corporation ifit is not deductible under section 162." R (citing M Farms, Inc.

To qualify for deduction under section 162 or 212, expenses must be associated with a trade or business or other income-producing activity that is functioning as a going concern.

Section 162 permits a taxpayerto deduct ordinary and necessary business expenses paid or incurred during the taxable year, including "a reasonable allowance for salaries or other compensation for personal services actually - 9 - [*9] rendered". Sec. 162(a)(1). Petitioner contends that the compensation was paid to Mr. Sanders, who claims to have re

"An expenditure generally does not have independent and substantial importance to the distributing corporation ifit is not deductible under section 162." R (citing M Farms, Inc.

Neither section 162 nor the regulations promulgated thereunder define the term "expense" other than through exemplification.

generate original issue discount (OID) income under section 1272. According to respondent, petitioner is - 97 - not entitled to depreciation deductions under section 168, interest deductions under section 467, or transaction cost deductions under section 162. In the alternative, respondent argues that the test transactions lack economic substance because they were driven by tax considerations and the desire to defer taxation ofa $1.6 billion gain, not by a legitimate business purpose. According

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

Additionally, to be allowed as a deduction under section 162, the expenditure must be "directly connected with or pertaining to the taxpayer's trade or business".

9 - [*19] T.J. Enters., Inc. v. Commissioner, 101 T.C. 581 (1993)), aff'd, 19 Fed. Appx. 90 (4th Cir. 2001). "An expenditure generally does not have independent and substantial importance to the distributing corporation ifit is not deductible under section 162." Id. (citing P.R. Farms, Inc. v. Commissioner, 820 F.2d 1084, 1088 (9th Cir. 1987), a_fff'g T.C. Memo. 1984-549). We find respondent has sufficiently established an evidentiary foundation to shift the burden to the Shahs on this.issue. Re

9 - [*19] T.J. Enters., Inc. v. Commissioner, 101 T.C. 581 (1993)), aff'd, 19 Fed. Appx. 90 (4th Cir. 2001). "An expenditure generally does not have independent and substantial importance to the distributing corporation ifit is not deductible under section 162." Id. (citing P.R. Farms, Inc. v. Commissioner, 820 F.2d 1084, 1088 (9th Cir. 1987), a_fff'g T.C. Memo. 1984-549). We find respondent has sufficiently established an evidentiary foundation to shift the burden to the Shahs on this.issue. Re

9 - [*19] T.J. Enters., Inc. v. Commissioner, 101 T.C. 581 (1993)), aff'd, 19 Fed. Appx. 90 (4th Cir. 2001). "An expenditure generally does not have independent and substantial importance to the distributing corporation ifit is not deductible under section 162." Id. (citing P.R. Farms, Inc. v. Commissioner, 820 F.2d 1084, 1088 (9th Cir. 1987), a_fff'g T.C. Memo. 1984-549). We find respondent has sufficiently established an evidentiary foundation to shift the burden to the Shahs on this.issue. Re

9 - [*19] T.J. Enters., Inc. v. Commissioner, 101 T.C. 581 (1993)), aff'd, 19 Fed. Appx. 90 (4th Cir. 2001). "An expenditure generally does not have independent and substantial importance to the distributing corporation ifit is not deductible under section 162." Id. (citing P.R. Farms, Inc. v. Commissioner, 820 F.2d 1084, 1088 (9th Cir. 1987), a_fff'g T.C. Memo. 1984-549). We find respondent has sufficiently established an evidentiary foundation to shift the burden to the Shahs on this.issue. Re

Petitioner's Schedule A and Schedule C Deductions Section 162 permits a taxpayer to deduct ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

l ofhis expenses to be deductible as ordinary and 5The legal and professional expenses related to the settled issue are not deductible on petitioner's Schedule C because petitioner agreed to capitalize them. - 12 - necessary business expenses under section 162. First, in 2008 and 2009 petitioner began to develop a business in student association development consulting. In 2008 petitionertraveled to Libya to help Libyan students come to the United States for postgraduate education. Second, petiti

Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.3 Generally, no deduction is allowed for personal, living, or family expenses. See sec. 262. The taxpayermust show that any deducted business expenses were incurred primarily for business rather th

- 3 - [*3] After concessions by the parties,2 the issues for decision are: (1) whether petitioners had a trade or business in 2008 or 2009 under section 162, which would permit Mr.

s relating to these risks. P's subsidiaries deducted, as insurance expenses, the payments to L. In notices ofdeficiency issued to P, R determinedthat the payments were not deductible. Held: P's subsidiaries' payments to L are deductible, pursuant to I.R.C. sec. 162, as insurance expenses. SERVED JAN 1 4 2014 - 2 - Val J. Albright and Brent C. Gardner, Jr., for petitioners. R. Scott Shieldes and Daniel L. Timmons, for respondent. FOLEY, Judge: Respondent determined deficiencies of$14,931,159, $13

s relating to these risks. P's subsidiaries deducted, as insurance expenses, the payments to L. In notices ofdeficiency issued to P, R determinedthat the payments were not deductible. Held: P's subsidiaries' payments to L are deductible, pursuant to I.R.C. sec. 162, as insurance expenses. SERVED JAN 1 4 2014 - 2 - Val J. Albright and Brent C. Gardner, Jr., for petitioners. R. Scott Shieldes and Daniel L. Timmons, for respondent. FOLEY, Judge: Respondent determined deficiencies of$14,931,159, $13

(Legacy), were deductible, pursuant to section 162, as insurance expenses.

the evidence. Thus, the allocation of the burden ofproofis immaterial. See Van Dusen v. Commissioner, 136 T.C. 515, 522 (2011); Martin Ice Cream Co. v. Commissioner, 110 T.C. 189, 210 n.16 (1998). II. HFM's Advanced Expenses Are Not Deductible Under Section 162. The parties disagree on the proper tax treatment ofthe advanced expenses for which HFM claimed deductions for 2005 and earlier years. (The advanced expenses that HFM capitalized are not at issue.) HFM argues that the advanced expenses fo

Whether an expense is deductible under section 162 is a question offact to be decided on the basis ofall the relevant facts and circumstances.

pondent does not contest that petitioners actually made payments to James Guy during 2007. Rather, respondent contends that petitioners have failed to show that any amounts paid to James Guy constituted ordinary and necessary business expenses under section 162. Section 162(a) provides: "There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". An ordinary expense is one that is common - 9 - [*9]

on packages for its owner-employeeswere unreasonable and disallowed deductions for compensation paid for the 2003 through 2005 tax years. Held; The compensation packages paid to the corporation's owner-employees were reasonable and deductible under I.R.C. sec. 162, for the 2003, 2004, and 2005 tax years to the extent determined herein. The compensation paid to the owner-employees' daughter, Grace-Ann Strick, was unreasonable. 1Cases ofthe following petitioners are consolidated herewith: Thousand

deral income tax return. Sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs. Unreimbursed Employee Business Expenses Deduction A taxpayerwho is an employee may deduct unreimbursed employee expenses as an ordinary and necessary business expense under section 162. Sec. 162(a)(2); Lucas v. Commissioner, 79 T.C. 1, 6 (1982). However, personal expenses are not deductible. Sec. 262. In general, the cost ofdaily commuting to and from work is a personal expense and therefore not deductible. See - 5 - [*5

The issue for decision is whether petitioner is entitled to a deduction pursuantto section 162 for alleged unreimbursed employee business expenses.

A trade or business expense is ordinary for purposes ofsection 162 ifit is normal or customary within a particular trade, business, or industry, and it is necessary ifit is appropriate and helpful for the development ofthe business.

- 9 - [*9] Section 280A(a) provides that for individual taxpayers "no deduction otherwise allowable under this chapter [which includes section 162] shall be allowed with respect to the use ofa dwelling unit which is used by the taxpayer during the taxable year as a resideuce." Section 280A(c)(1) contains an exception to section 280A(a).

Respondent - 8 - urges two distinct grounds for disallowing a deduction for these expenses: that they were nondeductible commuting expenses and that, ifthey would otherwise qualify for deduction under section 162, they fail the substantiation tests ofsection 274(d).

In the TIWAG and Dortmund transactions, John Hancock incurred legitimate transaction costs as part of its acquisition of a future interest in the subject assets. However, any transaction costs with respect to the series A and B debt in each transactions are not deductible, as we have found that they were not genuine indebtedness. In the L

(3) Whether section 280C(a) requires that Uniband’s section 162 deductions for wage and employee expenses be reduced by the entire amount of the Indian employment credit for which Uniband was eligible under section 45A(a), even if Uniband did not claim the credit.

A business expense is ordinary for purposes ofsection 162 ifit is normal or customary within a particular trade, business, or industry and is necessary ifit is appropriate and helpful for the development ofthe business.

"Until that time, expenses related to * * * [the] activity are not 'ordinary and necessary' expenses currently deductible under section 162 (nor are they deductible under section 212) but rather are 'start-up' or 'pre-opening' expenses." Woody v.

respect to petitioner's testimony, we found it to be uncorrobo- With respect to educational expenses, such as the so-called training costs that petitioner claimed as part of"Other expenses" in his 2007 Schedule C, expenses that a taxpayer incurs "in obtaining an education or in furthering his education are not deductible unless they qualify under section 162 and § 1.162-5".

Where a business purpose is established forthe gift, pursuantto section 162, the business gift deduction is restrictedto $25 perdonee pertaxable year.

The Settleinent Payment and Legal Fees Under section 162, a business may deduct ordinary and necessary business expenses.

After concessions, the issues for decision are: (1) whether Zweifel and Crews (collectively, petitioners) may deduct as section 162 business expenses in the years at issue amounts deposited in Build Up Fund_(BUF) accounts; (2) whether petitioners are liable for additions to tax for failure to file; and (3) whether petitioners are liable for accuracy-relatedpenalties.

We hold that Goyak & Associates may not deduct the payment, as it is not an ordinary and necessary business expense under section 162 (a) ; (2) whether the $1.4 million paid to the Millennium Plan is taxable to Mr.

e revenue ruling the IRS ruled that certain contingent environmental liabilities that a transferee assumed in a section 351 exchange were not liabilities for purposes of sections 357(c)(1) and 358(d) and that the transferee, in accordance with its method of accounting, could, as appropriate, either deduct the liabilities as business expenses under section 162 or capitalize the liabilities as capital expenditures under section 263.

Section 183(c) defines an activity not engaged in for profit as "any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212." An activity is engaged in for profit if the taxpayer's "predominant, primary or principal objective" in engaging in the activity was to realize an economic profit independent of tax savings.

t $19,207 is less than 1 percent of Future Satellite's reported gross income. of $995,438. Petitioners' failure to report the additional amount as income does not result in an increase in self-employment tax. Self-employment tax is imposed on self-employment income, which is the net earnings from a trade or business less allowable deductions under sec. 162. See secs. 1401 and 1402.

Section 162 (a) authorizes a deduction for "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". A trade or business expense is ordinary for purposes of section 162 if it is normal or customary within a particular trade, business, or industry and is necessary if it is appropriate an

Based upon our examination of the entire record before us, we find that petitioners have failed to carry their burden of establishing that they are entitled for their taxable years 2005 - 22 - and 2007 to car and truck expense deductions under section 162 (a) of $74 , 737 and $72 , 517 .

to work with and summarize our findings in the following paragraphs. 1. Contract Labor In general, payments made or incurred by a trade or business for personal services rendered are ordinary and necessary business expenses and may be deducted únder section 162. Sec. 1.162-7(a), Income Tax Regs. Petitioner claimed on her Schedule C a deduction of $34,880 for contract labor. Respondent disallowed the entire amount for lack:of substantiation. None of the numerous receipts petitioner offered in sup

(DKD), entitled to deduct under section 162 (a) certain respective amounts relating to its cattery activity that it (a) reimbursed to Debra K.

Thus, he was not, pursuant to section 162, carrying on a trade or business.

Petitioners' expenses can be divided into two categories : (1) Those that must meet the strict substantiation requirements of section 274(d) in addition to otherwise qualifying as deductible under section 162 and (2) those that must meet only the general substantiation requirements of section 162 .

Although the term "trade or business" is not precisely defined in section 162 or the regulations promulgated thereunder, it is well established that in order for an activity to be considered a taxpayer's trade or business for purposes relevant here, the activity must be conducted "with continuity and regularity" and "the taxpayer's primary purpose for engaging in the activity must be for income or profit ." Commi

Section 162 Travel Expenses As a general rule, personal living expenses ar e nondeductible . Sec . 262; secs . 1 .162-2(a), 1 .262-1(b) (5), Income Tax Regs . However, section 162(a)(2) allows a taxpayer to deduct ordinary and necessary travel expense s (including . meals and lodging) paid or incurred while away from home in pursuit of a trade or b

In order to qualify for the deduction under section 162(a ), "an item must (1) be `paid or incurred during the taxable year,, ( 2) be for `carrying on any trade or business ,.' ( 3) be an `expense ,' (4) be a `necessary' expense, and ( 5) be an `ordinary' expense ." Commissioner v .

A trade or business expense is ordinary for purposes of section 162 if it is normal or customary within a particular trade, business, or industry and is necessary if it is appropriate and helpful for the development of the business.

-As used in section 179 the term "trade or business" has the same meaning as in section 162 and the regulations thereunder, and therefore property held merely for the production of income does not qualify as section 179 property.

Griffin thus failed to establish that such expenses were ordinary and necessary for her businesses as required by section 162, or even that they were business-related at all.

1985-13, .("`before expenses will be considered ordinary and necessary under section 162, it must be established that they bear a proximate and direct relationship to the taxpayer's trade or business .'" (quoting Carroll v .

Taxpayers may -deduct expenses for articles of clothing' .under x section 162 (a), only :if'the,, clothing is required `in .

of 1 section 183 because the activity was no a ,trade or business .' If a taxpayer is not engaged in a trade or business under section 162, he generally may deduct the expens s related to an activ{l{ity k 'Anot engaged in for profit" only to the extent of the gross income derived from the activity for th~ taxable year .

Thus, his employment with Reinauer was not temporary within the meaning of section 162(a ) in that he was employed for a period in excess of 1 year .

To be engaged in a trade or business with respect to which deductions are allowable under section 162, the taxpayer must be involved in the activity with continuity and regularity, and the taxpayer's primary purpose for engaging in the activity must be for income or profit .

titioners ' Schedule E Business Section 162(a) authorizes a deduction for "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business" . trade or business expense is ordinary for purposes of section 162 if it. .is normal or customary within a particular trade, b siness, or industry and 6 - is necessary if it is appropriate and helpful for the development of the business . Commissioner v . Heininger , 320 U .S . 467, 471 (1943) ; Deputy v

The cost to purchase and maintain work clothing and shoes may be deductible under section 162 if the taxpayer can establish that : (1) The clothing is required or essential in the taxpayer's employment ; ( 2) the clothing is not suitable for general or personal wear; and ( 3) the clothing is not worn for general or personal purposes .

A trade or business expense is ordinary for purposes of section 162 if it is normal or customary within a particular trade, business, or industry and is necessary if it is appropriate and helpful for the development of the business .

To be engaged in a trade or business with respect to which deductions are allowable under section 162, "the taxpayer must be involved in the activity with continuity and regularity", and "the taxpayer's primary purpose for engaging in the activity must be for income or profit ." Commissioner v .

entitled to deduct all of the ordinary and necessary business expenses paid or incurred during the taxable year in carrying on a trade or business. The taxpayer bears the burden of proving that the expenses were ordinary and necessary according to section 162. In certain circumstances, the taxpayer must meet specific substantiation requirements in addition to section 162. See sec. 274. To be “ordinary” the transaction which gives rise to the expense must be of a common or frequent occurrence in

In another statement attached to t h it 2002 return, petitioners listed their other expenses s follows : Sailor required medical expenses $1,227 Sailor required supplies 655 Sailor uniforms/cleaning 692 Sailor union dues 914 3,48 8 OPINION Section 162 permits taxpayers to deduct all ordinary an d necessary business expenses paid or incurred during the taxable year and specifically includes traveling expenses (including amounts expended for meals and lodging other than amounts that are lavish or

The issues for decision are : (1) Whether petitioner conducted a trade or business as that term is used in section 162 ; (2) if so, whether petitioner satisfied the substantiation requirements for expenses relating to that trade or business ; and (3) whether petitioner is liable for the addition to tax for failure to file a timely return under section 6651(a)(1) .

ngaged in a trade or business during that year . We conclude that petitioner was not engaged in a trade or business of trading securities during the years at issue and thus that his expenses related to his trading activities are not deductible under section 162 . We also agree with respondent's determination that none of the expenses, but for the $200 and $28 expenses allowed in the notice of deficiency, are deductible by petitioner under section 212, in that petitioner has failed to demonstrate

Even if it is determined that the expenses are ordinary and necessary, they are deductible under section 162 only to the extent that they are reasonable in amount.

The parties agree that petitioners are entitled to deduct the legal fees as a trade or business expense under section 162 .3 The parties disagree, however, regarding the nature of petitioner's relationship with RHB and the appropriate treatment of the legal fees deduction .

d during the taxable year in carrying on a trade or bus ness are generally deductible . Sec . 162(a) . An activity must be conducted wit h continuity, regularity, and the primary purpose of earning a profit to be considered a trade or business under section 162 . Commissioner v . Groetzinger , 480 U .S . 23, 35 ( 987) . Whether the 3While sec . 165(a) generally permits the eduction of losses from gross income, there is a special rule limiting the deduction of gambling losses . Losses from wageri

cessary expenses paid or incurred in carrying on a trade or business . Petitioner claims to be in the trade or business of research, and we are, therefore, faced with the initial question of whether he is in a trade or business within the meaning of section 162 . In Commissioner v . Groetzinger, 480 U .S . 23, 35 (1987), the Supreme Court held that "if one's * * * activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere ho

paid or incurred in carrying on a trade or business . Petitioner claims to be in the trade or business of providing motorcycle lessons, and we are, therefore, faced with the initial question whether he is in a trade or business within the meaning of section 162 . In Commissioner v . Groetzinger , 480 U .S . 23, 35 (1987), the Supreme Court held that "if one's * * * activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere h

Although small hand tools, paper, and ink could fit the description of incidental materials and supplies the costs of which may be deducted currently under section 162, petitioner 16 Petitioner does not argue that sec.

1 .162-7(a), 1 .162-10(a), Income Tax Regs . Respondent argues that petitioners are not entitled to a business expense deduction for the employee benefit plan expense reimbursement because they failed to prove that the total compensation paid to Mrs . Francis in 2001 was reasonable in amount . We agree. The deductibility of employ

. 1357, 1361 (1971) . Therefore, this Court finds that petitioner's commercial pilot training was part of a program of study which qualified him for a new trade or business, and the expenses paid in 2002 to attend the program are nondeductible under section 162 . See sec . 1 .162- 5(b)(3), Income Tax Regs . Respondent contends petitioner is liable for a section 6662 penalty because the underpayment of tax was attributable to negligence. Section 6662(a) imposes a 20-percent accuracy- related pena

Respondent determined that neither the PCs' payments to VRD/RTD related to the STEP plan nor VRD/RTD' s ensuing contributions to the STEP plan were deductible under section 162 (a) as ordinary and necessary business expenses and that the amounts of the payments were includable in the doctors' gross income under section 61(a) .

Section 162 provides for deduction of all ordinary and necessary business expenses paid or incurred during the taxable year in carrying on a trade or business. For petitioner’s ministerial activity to qualify as a trade or business, his dominant or primary objective of the venture must be to earn a profit. Hildebrand v. Commissioner, 28 F.3d 1024,

deficiency without prejudicial delay and filed timely a petition. Held, further, P was not a statutory employee for 2000. Held, further, The majority of R’s deficiency determinations are sustained. P failed to meet the substantiation requirements of sec. 162, I.R.C., and where applicable, sec. 274, I.R.C., for most of the deductions, or portions thereof, that R disallowed. - 2 - Gary Lee Colvin, pro se. Daniel N. Price, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION WHERRY, Judge: This

The Court further holds the Kanters are not entitled to deductions under section 162 for 1979 with respect to IRC’s claimed business expense deductions.

e not in dispute. Petitioner reported the income and expenses from her horse boarding and training activities on Schedules C, Profit or Loss From Business, but concedes that the expenses attributable to the activities are not deductible pursuant to section 162. Rather, petitioner contends that the horse boarding and training expenses are deductible pursuant to section 212. Respondent concedes petitioner engaged in horse boarding and training activities for profit beginning in 1998 and does not d

independently in the business of leasing his truck to his employer. It is clear that an individual may be in the trade or business of being an employee and that ordinary and necessary expenses incurred in that trade or business are deductible under section 162. See sec. 1.162-17(a), Income Tax Regs. Section 162(a) allows a taxpayer to deduct all ordinary and necessary business expenses paid or incurred during the taxable year in carrying on a trade or business. To be “necessary” an expense must

As discussed infra, petitioner has failed to introduce credible evidence of his entitlement, under section 162, to the disallowed Schedule C deductions.

AdaCom program which provided an alternative to the TRS through the use of a computer rather than a relay operator. On their 2000, 2001, and 2002 Federal income tax returns, Ps claimed a disabled access credit. See sec. 44, I.R.C. Ps also claimed a sec. 162, I.R.C., trade or business expense deduction. R disallowed the credit and deduction. Held: Because the AdaCom program was not acquired by Ps in order for them to comply with the applicable requirements of the Americans with Disabilities Act

Amount disallowed 1992 $80,359 -0- $80,359 1993 108,097 -0- 108,097 - 28 - Respondent determined that the amounts disallowed with respect to Mr. Wechsler and Mrs. Wechsler exceeded a reasonable allowance for services rendered within the meaning of section 162. With respect to Gilbert, respondent determined that no amounts were allowable because no information was provided showing any service Gilbert rendered to petitioner. OPINION I. Introduction This case is what is conventionally known as a "

- 8 - Section 162 allows a deduction for ordinary and necessary expenses that are paid or incurred during the taxable year in carrying on a trade or business. Sec. 162(a); Deputy v. duPont, 308 U.S. 488, 495 (1940). In the case of travel expenses and certain other expenses, such as entertainment, gifts, and expenses relating to the use of listed properti

The term “trade or business” is not precisely defined in the Internal Revenue Code or the regulations promulgated thereunder; however, it is well established that in order for an activity to be considered a taxpayer’s trade or business for purposes of section 162, the activity must be conducted “with continuity and regularity”, and “the taxpayer’s primary purpose for engaging in the activity must be for income or profit.” Commissioner v.

The Court agrees with respondent.5 Section 162 allows a deduction for ordinary and necessary expenses that are paid or incurred during the taxable year in 4Under sec.

subscribed to the AdaCom program which provided an alternative to the TRS through the use of a computer rather than a relay operator. On their 2000 Federal income tax return, Ps claimed a disabled access credit. See sec. 44, I.R.C. Ps also claimed a sec. 162, I.R.C., trade or business expense deduction. R disallowed the credit and deduction. Held: Because the AdaCom program was not acquired by Ps in order for them to comply with the applicable requirements of the Americans with Disabilities Act

AdaCom advised program subscribers to include $7,750 in income, deduct $5,250 as an ordinary and necessary business - 6 - expense pursuant to section 162, and claim a credit equal to $5,000 pursuant to sections 38 and 44.

The issues for decision are: (1) Whether petitioner’s gambling activity amounted to a trade or business under section 162, thereby allowing her to deduct gambling losses on Schedule C, Profit or Loss From Business, of her Federal income tax return, and (2) whether petitioner is liable for the section 6662(a) penalty.

Substantiation Required.--No deduction or credit shall be allowed–- (1) under section 162 or 212 for any traveling expense (including meals and lodging while away from home), (2) for any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, or with respect to a facility used in connection with such an activity, (3) for any expense for gifts, or (4) wit

Generally, a taxpayer must establish that deductions taken pursuant to section 162 are ordinary and necessary business expenses and must maintain records sufficient to substantiate the amounts of the deductions claimed.

Whether OMCC and Petitioner May Deduct Their Shares of the Settlement Payment We next consider how much (if any) of its $350,000 payment OMCC may deduct under section 162 or must capitalize, and how -14- much (if any) of her $275,000 payment petitioner may deduct or must capitalize.

Rebates may be allowable under section 162 as business expenses if they are ordinary and necessary.

Further, it has been determined that the claimed Schedule C expenses are start-up expenditures and not deductible in the taxable year ended December 31, 1994 under section 162 of the Internal Revenue Code.

In the notice of deficiency and on brief, respondent allowed deductions under section 162 for the expenses petitioner paid in connection with the performance of services as an employee of IMC.

d that petitioner has failed to introduce “credible evidence” that any of the expenses deducted on Schedule C of the 1999 amended return were part of an activity engaged in by her for profit, which would have rendered those expenses deductible under section 162. Therefore, it follows that petitioner bears the burden of proof with respect to her entitlement to those deductions pursuant to Rule 142(a).7 6 We interpret the quoted language as requiring the taxpayer’s evidence pertaining to any factu

Under section 162, a taxpayer may deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. Sec. 162(a). Although the term “trade or business” is not precisely defined in section 162 or the regulations promulgated thereunder, it is well established that in order for an activity to be conside

deductible regardless of whether the taxpayer is an individual or a trust. United States v. Buttorff, 761 F.2d 1056, 1060 (5th Cir. 1985). The OMK trusts did not engage in any trade or business. Thus, the claimed deductions are not deductible under section 162. Transferring property into the trusts did not aid in the production of income, nor did it alter management activity. - 20 - Petitioners simply restructured the form in which they held their property. Rearranging title is not related to m

Expenses allowable under section 162 must be “directly connected with or pertaining to the taxpayer’s trade or business”.

Expenses allowable under section 162 must be “directly connected with or pertaining to the taxpayer’s trade or business”.

As such, we conclude that petitioners have failed to establish that they are entitled to the deductions claimed on their Schedules C under section 162, much less under the strict standards of section 274.

1985 through 1988. See appendix A. In reconstructing petitioner’s expenses, respondent disallowed many of the deductions petitioner claimed for a failure to substantiate or a failure to show an ordinary and necessary business expense for purposes of section 162. Respondent allowed deductions for petitioner’s real estate business in much larger amounts than petitioner originally claimed on his returns.65 OPINION Petitioner did not present any evidence that respondent erred in reconstructing his S

g condition fringe”. As applicable to the case at hand, a “working condition fringe” is any property or services provided to an employee to the extent that, if the employee had paid for the property or services, the payment would be deductible under section 162. Sec. 132(d); see also sec. 132(j)(8). Alternatively, pursuant to section 62(a)(2)(A) and section 1.62-2, Income Tax Regs., certain reimbursements or expense allowances paid to employees by employers may be excludable from an employee’s i

o his work, he is never “away” from home.’” Deamer v. Commissioner, supra at 339 (quoting Hantzis v. Commissioner, 638 F.2d 248, 253 (1st Cir. 1981)). Lacking a tax home, the taxpayer is entitled to no business deduction for traveling expenses under section 162. See Kroll v. Commissioner, 49 T.C. 557, 562 (1968). During the tax years at issue, petitioner had no principal place of business, nor did he incur substantial living expenses at a permanent residence. His stays at the Green Bay house (ab

A taxpayer seeking to deduct trade or business expenses under section 162 must establish that the underlying activity was engaged in with an actual and honest profit objective.

Respondent determined that (1) Waterfall Farms failed to establish that the food and lodging expenses were ordinary and necessary business expenses under section 162 and (2) those items are the Hubers’ personal expenses.

oss receipts from Great Western Kingdom. OPINION The question we consider is whether petitioner is entitled to deduct the Sherman Oaks Property rent payments (rent payments) made to his mother as ordinary and necessary business expenses - 6 - under section 162. Section 162(a) allows a deduction for “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business”. Section 162(a)(3) specifically includes “rentals or other payments required to

It has long been settled law that-- The sum of all compensation, deferred as well as direct, must meet the requirement of §162 that it be reasonable in amount.

Respondent determined that (1) Dreyer Farms failed to establish that the food and lodging expenses were ordinary and necessary business expenses under section 162 and (2) those items are the Weeldreyers’ personal expenses.

Whether petitioner may under section 162 deduct certain legal expenses paid by him.2 We hold he may.

Respondent determined that (1) Wolf Creek Farm failed to establish that the food and lodging expenses were ordinary and necessary business expenses under section 162 and (2) those items constitute Mr.

Generally, a taxpayer must establish that deductions taken pursuant to section 162 are ordinary and necessary business expenses and must maintain records sufficient to substantiate the amounts of the deductions claimed.

lowed to the extent that such expense, when added to prior expenses of the taxpayer for gifts made to such individual during the taxable year, exceeds $25. Sec. 1.274-3(a), Income Tax Regs. The business gift must also be ordinary and necessary under section 162. Because petitioner provided supporting canceled checks, invoices and bills, and other substantiating information, we are satisfied that petitioner has provided credible evidence and satisfied the requirements of section 162 and (if appli

Section 183(c) defines an “activity not engaged in for profit” as “any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212.” In determining whether an individual engages in an activity for profit, we consider all the facts and circumstances, Golanty v.

Initially, we observe that generally a taxpayer may not deduct payments made pursuant to a section 6672 liability as an ordinary and necessary business expense under section 162, Smith v.

Petitioner initially claims that she may deduct these expenditures as business expenses under section 162 or as expenses for the production of income under section 212.

However, section 274(d) precludes use of the so-called Cohan rule and provides that no deduction is allowable under section 162 for any traveling expenses, including meals and lodging while away from home unless the taxpayer complies with strict substantiation rules.

Under section 162, a deduction is allowed for ordinary and necessary expenses that are paid or incurred during the taxable year in carrying on a trade or business. Sec. 162(a). Section 167 allows a depreciation deduction for property used in a trade or business or held for the production of income. Sec. 167(a). Generally, a taxpayer is required to substa

Payments which qualify as charitable contribution deductions under section 170 are not deductible as ordinary and necessary business expenses under section 162 if they fail to qualify as legitimate business 5 Sec.

A taxpayer may deduct meal expenses under section 162 if they are ordinary and necessary business expenses and if he or she meets the substantiation requirements of section 274(d).

Baldwin III (petitioner) that purportedly owned and managed a 5,000-acre lakefront lodge property known as Granot Loma, operated a trade or business within the meaning of section 162 or conducted an activity “not engaged in for profit” within the meaning of section 183; (2) whether the duty of consistency or the doctrine of equitable estoppel applies to bar petitioner’s contention that Baldwin Aircraft Corp.

Section 162 allows the deduction of “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business”. Section 1.162-4, Income Tax Regs., further provides: The cost of incidental repairs which neither materially add to the value of the property nor appreciably prolong its life, but keep it in an

OPINION Section 162 allows deductions for all ordinary and necessary expenses incurred in carrying on a trade or business. Sec. 162(a). These expenses include traveling expenses (i.e., meals and lodging) while away from home. Sec. 162(a)(2). However, section 162 does not allow deductions for personal, living, or - 5 - family expenses. Sec. 262. To qualify

Section 183(c) defines an activity “not engaged in for profit” as any activity other than one for which deductions are “allowable * * * under section 162 or under paragraph (1) or (2) - 7 - of section 212.” For deductions to be allowed under section 162 or section 212(1) or (2), taxpayers must establish that they engaged in an activity with the actual and honest objective of making an economic profit independent of tax savings.

Substantiation of Schedule C Deductions Section 162 permits a deduction for ordinary and necessary - 5 - expenses incurred in carrying on a trade or business during the taxable year.

Section 179 Election Petitioners contend that if we sustain respondent’s determination on the section 162 issue, which we have, then they will need to file amended tax returns.

Section 162 allows the deduction of “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business”. Section 1.162-4, Income Tax Regs., further provides: The cost of incidental repairs which neither materially add to the value of the property nor appreciably prolong its life, but keep it in an

Baldwin III (petitioner) that purportedly owned and managed a 5,000-acre lakefront lodge property known as Granot Loma, operated a trade or business within the meaning of section 162 or conducted an activity “not engaged in for profit” within the meaning of section 183; (2) whether the duty of consistency or the doctrine of equitable estoppel applies to bar petitioner’s contention that Baldwin Aircraft Corp.

- 3 - purported rental real properties for 1992 and 1993 and, if so, in what amounts; (3) whether petitioners are entitled under section 162 or 212(2) to deduct on Schedule E, Supplemental Income and Loss, expenses with respect to their two purported rental properties for 1992 and 1993 and, if so, in what amounts; (4) whether petitioners are entitled to deduct under section 172 certain net operating losses they had computed with respect to 1990 and 1991 and carried forward t

Respondent determined that CFC improperly deducted the costs under section 162 because CFC did not incur or pay the costs in connection with its trade or business.

Respondent determined that CFC improperly deducted the costs under section 162 because CFC did not incur or pay the costs in connection with its trade or business.

Respondent determined that CFC improperly deducted the costs under section 162 because CFC did not incur or pay the costs in connection with its trade or business.

d losses in both 1995 and 1996 which reduced his gross income and effectively lowered his tax liability. We conclude that the expenses here at issue, if - 9 - actually paid, are personal expenses and not deductible trade and business expenses under section 162. In reaching our holdings herein, we have considered all arguments made, and to the extent not mentioned above, we conclude they are moot, irrelevant, or without merit.2 Reviewed and adopted as the report of the Small Tax Case Division. To

Reasonable compensation for services actually rendered is deductible under section 162 as an ordinary and necessary business expense.

6662(a) 1992 $57,466 $11,493 1993 39,669 7,934 1994 7,161 1,432 1995 36,098 7,220 After concessions, the issues for decision are: (1) Whether petitioner is entitled to deduct trade or business expenses under section 162 with respect to his Villa Del Mar hotel venture for 1992, 1993, 1994, and 1995.

Reasonable compensation for services actually rendered is - 18 - deductible under section 162 as an ordinary and necessary business expense.

Reasonable compensation for services actually rendered is - 18 - deductible under section 162 as an ordinary and necessary business expense.

Some deductions previously allowable under section 162 were disallowed by the enactment of section 274.

For a guaranteed payment to be a partnership deduction, it must meet the same tests under section 162 as it would if the payment had been made to a person who is not a member of the partnership.

iously, the Courts of Appeals for the Second, Seventh, and Ninth Circuits have applied an independent investor test in determining whether payments to an employee- shareholder are deductible by a taxpayer-corporation as reasonable compensation under section 162. In applying their respective versions of the independent investor test, the Courts of Appeals for the Second and Ninth Circuits have considered many of the same or similar factors in determining reasonable compensation as examined above,

rendering services as an employee. See O’Malley v. Commissioner, 91 T.C. 352, 363-364 (1988), affd. 972 F.2d 150 (7th Cir. 1992); Primuth v. Commissioner, 54 T.C. 374, 377 (1970). Consequently, an employee’s business expenses may be deductible under section 162. See Johnson v. Commissioner, 115 T.C. 210, 217 (2000); O’Malley v. Commissioner, supra; Primuth v. Commissioner, supra at 377-378. Deductions are strictly a matter of legislative grace, and a taxpayer must meet the specific statutory req

Thus, in effect, respondent determined that the activity of each partnership was an "activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212." Sec.

Travel Expenses Section 162 allows taxpayers to deduct the “ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including * * * traveling expenses * * * while away from home”.

Section 162 provides for deductions for ordinary and necessary expenses incurred in carrying on a trade or business, including a reasonable allowance for salaries or compensation for services performed. Respondent, emphasizing case law from opinions of the Court of Appeals for the Ninth Circuit,3 argues that when payments are made to a corporate em

274(d) Substantiation Required.–-No deduction or credit shall be allowed-- (1) under section 162 or 212 for any traveling expense (including meals and lodging while away from home), (2) for any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, or with respect to a facility used in connection with such an activity, * * * * * * * (4) with respect to any lis

eals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business * * * Section 274(d)(1) provides that no deduction shall be allowed pursuant to the provisions of section 162 for traveling expenses, including meals and lodging, unless the taxpayer substantiates “by adequate records or by sufficient evidence corroborating the taxpayer’s own statement” the specific time, place, and amount of the claimed expendit

Rather, petitioner deducted the entire $999,151 as “Other Deductions” on line 26 of its 1995 Federal income tax return as an ordinary and necessary business expense pursuant to section 162 or, alternatively, as a depreciation deduction under section 167.

Petitioners’ Trade or Business Expenses The parties disagree about petitioners’ entitlement to deduct, pursuant to section 162, various trade or business expenses.

Discussion The issue for decision is whether legal fees incurred in connection with the State of California’s antitrust litigation are deductible as ordinary and necessary business expenses under section 162.2 Respondent determined that the legal fees must be capitalized pursuant to section 263(a).

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

Discussion P'etitioners argue that in 1990 Towers Construction incurred a loss of $460,000 as a result of CB&T's payment to Key West Polo against the letter of credit and that this amount is deductible pursuant to section 162 as a cost of goods sold because Towers Construction used the money to pay bills for materials, supplies, subcontractors, and labor.

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

Section 162 provides for a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in - 19 - carrying on a trade or business. Section 62(a)(2) allows a deduction for expenses paid or incurred by the taxpayer, in connection with the performance of services as an employee, under a reimbursement or other expense all

- 3 - (1) Whether, and if so then to what extent, petitioner understated its gross income (gross receipts less cost of goods sold) from the sale of diesel fuel; (2) Whether, and if so then to what extent, petitioner is entitled to claimed section 162 deductions for certain expenses; and (3) Whether, and if so then in what amount, petitioner is liable for an accuracy-related penalty under section 6662(a).

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

.) - 2 - decision are: (1) Whether petitioners failed to report $14,555 of Schedule C, Profit or Loss From Business, income for the 1994 tax year; (2) whether petitioners are entitled to deduct $2,035 for travel expenses and $1,330 for meals under section 162 as Schedule C business expenses; and (3) whether petitioners are liable for the accuracy-related penalty under section 6662(a).2 FINDINGS OF FACT Some of the facts have been stipulated and are so found.

After concessions, the issues for decision are whether petitioners are: (1) Entitled, pursuant to section 166, to a business bad debt deduction relating to 1993; (2) entitled, pursuant to section 162, to a business expense deduction relating to 1994; and (3) liable, pursuant to section 6662(a), for accuracy-related penalties relating to the deductions.

Section 162 provides for a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in - 19 - carrying on a trade or business. Section 62(a)(2) allows a deduction for expenses paid or incurred by the taxpayer, in connection with the performance of services as an employee, under a reimbursement or other expense all

The determination of whether an expenditure - 11 - satisfies the requirements for deductibility under section 162 is a question of fact.

ULTIMATE FINDINGS OF FACT The amount petitioner paid Union Mexico with respect to the costs for inspection and bathing of cattle was an ordinary and necessary section 162 expense.

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

mortgage interest on the nonrecourse indebtedness. 2. Held, further, P’s personal bankruptcy was proximately caused by liabilities arising from his law firm; thus, he may deduct an allocable portion of his bankruptcy fees as a business expense under sec. 162, I.R.C. 3. Held, further, P is not liable for an accuracy-related penalty under sec. 6662(b)(2), I.R.C., because he acted with reasonable cause and in good faith. - 2 - Patrick E. Catalano, pro se. Margaret S. Rigg, for respondent. MEMORANDU

The issues for decision are as follows: (1) Whether certain expenditures deducted by petitioners on Schedules C of their 1992 Federal income tax returns were incurred in a trade or business within the meaning of section 162; (2) alternatively, whether petitioners are entitled to deduct all or any part of the losses claimed-- (a) as theft losses arising from a transaction entered into for profit under section 165(c)(2), (b) as theft losses under section 165(c)(3), 1 Unless otherwise indicated, al

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

Accordingly, we hold that petitioners are entitled to deduct the cost of maintaining their towboat engines under section 162.10 To reflect the foregoing and to give effect to the agreements of the parties, Decision will be entered under Rule 155.

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

A “trade or business activity”, for purposes of the “incidental” exception, is defined as an activity (other than a rental activity or an activity incidental to the activity of holding property for investment) that: (1) Involves the conduct of a trade or business (within the meaning of section 162); (2) is conducted in anticipation of the commencement of a trade or business; or (3) involves research or experimental expenditures that are deductible under section 174.9 Sec.

In order for an activity to be considered a taxpayer's trade or business for purposes of section 162, the activity must be conducted “with continuity and regularity” and “the taxpayer's primary purpose for engaging in the activity must be for income or profit”.

To be deductible by the partnership, the guaranteed payments must meet the requirements of section 162; they must be ordinary and necessary expenses, reasonable in amount, and incurred in a trade or business.

We focus our inquiry on whether the chemotherapy drugs were supplies deductible under section 162, or merchandise that must be inventoried under section 471.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

Discussion Section 162 allows the deduction of "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

dependency exemptions) are computational. 2Respondent's statement of the issues presented differs from petitioner's in one material respect. Respondent states that an issue has been raised concerning the deductibility of the professional fees under sec. 162. Petitioner, however, has stated consistently throughout her opening and reply briefs that it is not necessary to address whether she was in the trade or business of being a trustee, preferring instead to argue her case under sec. 212 and re

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

An "activity not engaged in for profit" is any activity for which deductions would not be allowed under section 162 or under - 5 - paragraph (1) or (2) of section 212.

Section 162 Travel Expense Deductions Deductions are a matter of legislative grace. See New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Taxpayers bear the burden of proving that they are entitled to their claimed deductions. See Welch v. Helvering, 290 U.S. 111, 115 (1933). Section 162(a)(2) allows a taxpayer to deduct traveling expens

In order to be allowed as a deduction under section 162, a taxpayer must establish that the travel expenses were: (1) Reasonable and necessary; (2) incurred while away from home; and (3) incurred in pursuit of a trade or business.

Whether section 162 allows petitioner to claim deductions for 1982 through 1988 for expenses incurred by petitioner's alter ego corporations.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

(c) Activity Not Engaged in for Profit Defined.--For purposes of this section, the term "activity not engaged in for profit" means any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212.

Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. An ordinary and necessary expense is one which is appropriate and helpful to the taxpayer's business and which results from an activity which is common and accepted practice. See Boser v. Commissi

We hold that EVC's must be included in petitioner's income.4 (2) Whether petitioner is entitled to deductions under section 162 for any amounts paid to National Union Fire Insurance Co.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

Section 162 generally allows a deduction for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. The determination of whether an expenditure satisfies the - 15 - requirements of section 162 is a question of fact. See Commissioner v. Heininger, 320 U.S. 467, 475 (1943). Because peti

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

Unreimbursed Employee Business Expense Deduction In order to deduct unreimbursed employee business expenses, a taxpayer must satisfy the requirements of section 162, and, with respect to certain expenses, section 274.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

Hawthorne was engaged during the years at issue in carrying on a trade or business with respect to the properties in question within the meaning of section 162 and (2) that the claimed expenses are ordinary and necessary expenses paid or incurred in carrying on a trade or business within the meaning of that section.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

Preopening and startup expenses are not deductible under either section 162 or section 212.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

Whether section 162 allows Midwest to deduct payments to a trust promoter in the amounts of $12,000 and $5,500 for 1994 and 1996, respectively.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

We further hold that Kanter is not entitled to deductions under section 162 for 1979 with respect to IRC's claimed business deductions.

that the articles of clothing claimed as expenses were adaptable to general use. Therefore, petitioner's clothing expenses are not deductible. The remaining expenses for dry cleaning likewise constitute personal expenses and are not deductible under section 162. See sec. 262. Petitioner deducted approximately $15,529 for his legal education expenses on his Schedules C for tax years 1994 and 1995. Included in this amount is the cost of travel to California for the taking of law school examination

In addition to the requirements of section 162, section 274(d) requires strict substantiation of certain expenses including those incurred with respect to any listed property as defined in section 280F(d)(4), which includes any passenger automobile.

Section 162 provides for deduction of all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Petitioners presented no evidence, documentary or otherwise, to substantiate these expenses, and we sustain respondent's determination on this issue.3 As to self-employment tax, petitioner was a self

Because an S corporation's income and losses are passed through to its shareholders, the effect of the disallowances was to increase the income, or decrease the loss, - 5 - that petitioner was required to report on his individual Federal income tax returns for the years in issue.3 OPINION In general, section 162 provides for the deductibility of all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Substantiation Required.--No deduction or credit shall be allowed-- (1) under section 162 or 212 for any traveling expense (including meals and lodging while away from home), * * * * * * * (4) with respect to any listed property (as defined in section 280F(d)(4)[3]), 3 Sec.

they should be characterized as compensation income to the individual petitioners. Respondent also amended his answers with respect to certain royalty payments that respondent determined were not ordinary and necessary business expenses pursuant to sec. 162. In the notices of deficiency, respondent's alternative position was that the royalty rate should be adjusted, pursuant to sec. 482, to 5 percent. By way of amended answers, respondent asserts that the (continued...) - 4 - Unless otherwise in

e taxpayer’s trade or business. Carbine v. Commissioner, 83 T.C. 356, 363 (1984), affd. 777 F.2d 662 (11th Cir. 1985); Heineman v. Commissioner, 82 T.C. 538, 543 (1984). Only the portion of an expense that is reasonable in amount is deductible under section 162. United States v. Haskel Engg. & Supply Co., 380 F.2d 786, 788-789 (9th Cir. 1967). Pursuant to section 262(a), no portion of any expenditure attributable to personal, living, or family expenses may be deducted, except as otherwise expres

they should be characterized as compensation income to the individual petitioners. Respondent also amended his answers with respect to certain royalty payments that respondent determined were not ordinary and necessary business expenses pursuant to sec. 162. In the notices of deficiency, respondent's alternative position was that the royalty rate should be adjusted, pursuant to sec. 482, to 5 percent. By way of amended answers, respondent asserts that the (continued...) - 4 - Unless otherwise in

After concessions,1 the issues for decision are: (1) The amount petitioner is entitled to deduct under section 162 as reasonable compensation to its president Lon Martin for its year ended June 30, 1990.

t these courses qualified Herbert for the duties and activities of a sergeant instructor. Accordingly, we conclude that the education qualified Herbert for a new trade or business and sustain respondent's disallowance of the education expenses under section 162. Job-Seeking and Tax Return Preparation Expenses Petitioners also claimed deductions for miscellaneous expenses incurred in job seeking and for tax return preparation. Petitioners have presented no evidence to support the claimed job-seek

Hence, respondent contends that no deduction is allowed under section 162 for any part of the rent payment earmarked for Wysong Medical's use of the aforementioned equipment.

Deduction pursuant to IRC section 162 and Commissioner v.

t these courses qualified Herbert for the duties and activities of a sergeant instructor. Accordingly, we conclude that the education qualified Herbert for a new trade or business and sustain respondent's disallowance of the education expenses under section 162. Job-Seeking and Tax Return Preparation Expenses Petitioners also claimed deductions for miscellaneous expenses incurred in job seeking and for tax return preparation. Petitioners have presented no evidence to support the claimed job-seek

they should be characterized as compensation income to the individual petitioners. Respondent also amended his answers with respect to certain royalty payments that respondent determined were not ordinary and necessary business expenses pursuant to sec. 162. In the notices of deficiency, respondent's alternative position was that the royalty rate should be adjusted, pursuant to sec. 482, to 5 percent. By way of amended answers, respondent asserts that the (continued...) - 4 - Unless otherwise in

a 50 percent limitation on Schedule C of their 1994 Federal income tax return. Petitioners have not substantiated or explained this expense deduction and have not shown that this expense was incurred in carrying on a trade or business as required by section 162. We find that petitioners have not complied with the requirements of section 162 and hold that petitioners are not entitled to claim meals and entertainment expense deductions for the 1994 tax year. 2. Petitioners' 1995 Income As previous

they should be characterized as compensation income to the individual petitioners. Respondent also amended his answers with respect to certain royalty payments that respondent determined were not ordinary and necessary business expenses pursuant to sec. 162. In the notices of deficiency, respondent's alternative position was that the royalty rate should be adjusted, pursuant to sec. 482, to 5 percent. By way of amended answers, respondent asserts that the (continued...) - 4 - Unless otherwise in

The issues for decision are: (1) Whether petitioners are entitled to deduct unreimbursed employee expenses under section 162 in the net amount of $15,123 for the 1994 tax year; (2) whether petitioners overpaid their 1994 Federal income taxes; and (3) whether petitioners are liable for an accuracy-related penalty under section 6662(a) for the 1994 tax year.

they should be characterized as compensation income to the individual petitioners. Respondent also amended his answers with respect to certain royalty payments that respondent determined were not ordinary and necessary business expenses pursuant to sec. 162. In the notices of deficiency, respondent's alternative position was that the royalty rate should be adjusted, pursuant to sec. 482, to 5 percent. By way of amended answers, respondent asserts that the (continued...) - 4 - Unless otherwise in

In order for expenses to be deductible under section 162, they must relate to a trade or business functioning at the time they are incurred.

e excess of deferred loan origination costs over deferred fees. OPINION The sole issue for decision is whether certain expenditures incurred in connection with the origination of loans are deductible as ordinary and necessary business expenses under section 162. Respondent determined that they are not deductible because section 263 requires that they be capitalized. To qualify as an allowable deduction under section 162(a), an item must (1) be paid or incurred during the taxable year; (2) be for

they should be characterized as compensation income to the individual petitioners. Respondent also amended his answers with respect to certain royalty payments that respondent determined were not ordinary and necessary business expenses pursuant to sec. 162. In the notices of deficiency, respondent's alternative position was that the royalty rate should be adjusted, pursuant to sec. 482, to 5 percent. By way of amended answers, respondent asserts that the (continued...) - 4 - Unless otherwise in

of its relocating employees in both regular and assigned sales and that in petitioner's possession the residences are capital assets. Accordingly, respondent argues that petitioner cannot deduct the payments to the RSC against ordinary income under section 162. Although petitioner never took title to its employees' residences, respondent determined that in substance petitioner, by its control over the property, was the owner. Respondent's position thus follows the ruling position that relocatin

To the extent petitioner's payments to DM are disallowed as royalties, petitioner argues that it is entitled to deduct the payments under section 162 as payments to a charitable organization in expectation of commensurate financial benefit.

, and other fees relating to the formation of the Partnership, the transfer of the Washington properties, and the distribution of the partnership units. Petitioner agrees that these expenses are capital in nature and, therefore, not deductible under section 162. Rather, petitioner argues that such sales expenses may be used to offset its gain on the taxable distribution. It is well settled that costs connected with the sale of a capital asset are capital expenditures to be used to offset against

Whether petitioner, pursuant to section 162, is entitled to deduct certain compensation payments to shareholders in amounts in excess of the amounts determined by respondent.

To be "necessary" within the meaning of section 162, an expense need only be appropriate and helpful to the taxpayer's business.

However, section 162 is "not designed to regulate businesses by denying them a deduction for the payment of compensation in excess of the norm" in cases where other factors call for higher compensation.

1990 and 1991 Federal income taxes in the amounts of $2,896 and $1,843, respectively. The sole issue for decision is whether petitioners are entitled to claim deductions for political contributions as ordinary and necessary business expenses under section 162. Some of the facts have been stipulated and are so found. The stipulations of fact and attached exhibits are incorporated herein by this reference. Petitioners resided in McLoud, Oklahoma, on the date the petition was filed in this case. He

Whether petitioners, pursuant to section 162, are entitled to an above-the-line deduction for legal fees.

Roy, Inc.'s Rolls Royce Expenses The first issue for decision is whether the corporate petitioner is entitled to deductions pursuant to section 162 for the expenses incurred for the use and operation of the Rolls Royce during the years in issue.

Choe's properties in connection with this separate business; these expenses were deductible pursuant to section 162; therefore, he can offset these expenses against his medical practice income.7 Respondent asserts that petitioner has not shown he was in a trade or business; consequently, section 162 does not support his claimed deductions.

Remy provided to his patients, as an advertising expense under section 162; second, whether the subject tax deficiencies should be disallowed on the ground that the original revenue agent's report contained "gross errors of fact"; third, whether petitioners are liable for the accuracy-related penalty under section 6662(a).

Roy, Inc.'s Rolls Royce Expenses The first issue for decision is whether the corporate petitioner is entitled to deductions pursuant to section 162 for the expenses incurred for the use and operation of the Rolls Royce during the years in issue.

Expenditures deductible under section 174 need only be paid or incurred "in connection with" the taxpayer's trade or business, whereas expenses deductible under section 162 must be paid or incurred "in carrying on" such trade or business.

ude the remaining $800,000 allocated to the personal injury claims from their gross income. Ps also allocated the entire amount of attorney's fees and costs to the contract claim, and deducted those fees and costs as a Schedule C expense pursuant to sec. 162, - 2 - I.R.C. As R's primary position in the notice of deficiency, R determined that Ps' gross income includes the total amount of settlement proceeds. R determined that $380,000 was attributable to salary and wages, and an additional $420,0

In addition, respondent contends that petitioner's claimed expenses are not ordinary and necessary business expenses under section 162 and that petitioner has failed to meet the substantiation requirements of section 274(d).

Because we find that petitioner's tax home for purposes of section 162 was Jackson and not Oxford, except as set forth below petitioner may not deduct the travel expenses (including transportation, meals, and lodging) incurred for traveling between his residence in Oxford and his principal place of business in Jackson.

ement of Color Q's embezzlement suit against the S Corporation (the Color Q payment).1 Petitioners contend that the S Corporation was entitled to deduct the Color Q payment on its 1988 return as an ordinary and necessary business expense pursuant to section 162. Respondent contends that, because the S Corporation never included Mr. Jeffcott's embezzlement proceeds in its income, the S Corporation is not entitled to a deduction. Respondent relies on a line of cases holding that no deduction may b

ime that they spent on-call to provide advisory services as needed. See Yelencsics v. Commissioner, 74 T.C. 1513, 1524-1525 (1980). We - 22 - conclude that MIC's payment of these amounts qualifies as an ordinary and necessary business expense under section 162. The expense was ordinary and necessary mainly because it bore a reasonable and proximate relation to MIC's business. See Trust of Bingham v. Commissioner, 325 U.S. 365, 370 (1945); see also Commissioner v. Tellier, 383 U.S. 687, 689 (1966

Petitioners contend that they entered into and carried on the tree farm activity with the requisite profit objective and that, as a result, the deductions are allowed under section 162 or section 212.

year. B. Issues With Respect to Petitioner Douglas R. Prince, D.D.S., M.S., P.C. 1. Whether certain payments made by petitioner Douglas R. Prince, D.D.S., M.S., P.C. to petitioner Douglas R. Prince are deductible as compensation expenses pursuant to section 162; and 2. whether petitioner Douglas R. Prince D.D.S., M.S., P.C. is liable for additions to tax pursuant to sections 6651, 6653, and 6661. FINDINGS OF FACT Some of the facts have been stipulated for trial pursuant to Rule 91. The parties'

Discussion At issue is whether petitioner’s costs of removing the asbestos-containing materials are currently deductible pursuant to section 162 or must be capitalized pursuant to section 263 or as part of a general plan of rehabilitation.

After concessions by the parties, the issues for decision are: - 2 - (1) Whether petitioner's expenditures related to residential real property were paid or incurred in carrying on a trade or business pursuant to section 162 or for the production of income pursuant to section 212.

how whether or not the person is liable for tax. As in the prior cases, petitioner has taken the position that the expenses relating to her tutoring activity were incurred by her in connection with a trade or business and are deductible pursuant to section 162. Respondent argues that petitioner's tutoring activity does not constitute a trade or business because petitioner did not engage in such activity with the requisite profit objective. Consequently, according to respondent, petitioner cannot

Following respondent’s concession of the additions to tax, the sole issue for decision is the amount of compensation paid by petitioner that is reasonable and thus deductible as a section 162 business expense.

,089,369. Respondent also asserted in the amendment that petitioner was liable for an addition to tax under section 6661. We must decide the amount of compensation paid by petitioner that is reasonable and thus deductible as a business expense under section 162. We hold all of it is.1 Unless otherwise stated, section references are to the Internal Revenue Code in effect for the year in issue. Rule references are to the Tax Court Rules of Practice and Procedure. We separately refer to Thomas F. L

(3) Whether petitioner is entitled to a deduction under section 162 for certain amounts received from Western Family Foods (Western) and distributed to its member stores at its 1989 and 1990 food shows.

6662(a) 1991 $12,437 $2,487 1992 13,908 2,782 - 2 - After concessions by the parties,1 the issues for decision are: (1) Whether pursuant to section 162, petitioners may deduct Schedule A job-related education expenses in excess of the amounts allowed by respondent for the taxable years 1991 and 1992.2 We hold they may, to the extent set out below.

etitioners have not received the approval of the Internal Revenue Service (IRS) to amend their treatment of the expenses deducted. Farmers, like taxpayers in any other type of business, may deduct their ordinary and necessary business expenses under section 162. The farming business includes the operation of a nursery and the raising of ornamental trees such as petitioners' 4 ligustrum tree business. Sec. 1.263A-4T(c)(4)(i)(A), Temporary Income Tax Regs., 59 Fed. Reg. 39960 (Aug. 5, 1994). Expen

mining that I must define its items of inventory for its new car and new truck LIFO pools by model code. Sec. 446(b), I.R.C. 4. Held, further, the expenses I incurred in owning and operating its airplane during the years at issue are allowable under sec. 162, I.R.C. Patricia Tucker, for petitioner. Thomas F. Eagan, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION PARR, Judge: Respondent determined deficiencies in, additions to, and a penalty on petitioner’s Federal income tax for taxable

Although legal expenses related to the determination of Federal income taxes are deductible under section 162, see, e.g., Greene Motor Co.

Rent Deductions Section 162 provides for the deduction of all ordinary and necessary business expenses, including rentals required to be paid as a condition for the use of property.

- 7 - profit" is any activity for which deductions would not be allowed under section 162 or under paragraph (1) or (2) of section 212.

ts reasonable business needs and NITCO was availed of 1This Court granted petitioners' motion to consolidate. - 2 - to avoid income tax with respect to its shareholders. 2. Held, further, most of the legal expenses in issue are not deductible under sec. 162, I.R.C. 3. Held, further, M had constructive dividend income. 4. Held, further, NITCO is liable for the additions to tax. 5. Held, further, M and M’s wife are liable for the additions to tax. David J. Duez, Gail H. Morse, and Roger W. Wenthe,

Additionally, otherwise allowable deductions under section 162 or 212, which arose from an illegal activity, will not be disallowed on public policy grounds.

Section 162 allows as a deduction ordinary and necessary expenses 4 Since petitioner is allowed a greater deduction using the standard mileage rate deduction, petitioner is not allowed a depreciation deduction. See Rev. Proc. 74-23, 1974-2 C.B. 476. - 15 - paid or incurred during the taxable year in carrying on a trade or business. A self-employed

ssion on an unrelated issue brought up by petitioner's amendment of his 1990 return, the only issues remaining for decision relate to the deficiency and penalty for 1991, viz: (1) Whether petitioner, in 1986, was engaged in a trade or business under section 162, so as to be entitled to a $25,547 net operating loss carryover from 1986; (2) whether petitioner, in 1991, was entitled to deduct expenses of $6,471 as (a) ordinary and necessary trade or business expenses under section 162 or (b) expens

Trade or Business Section 162 provides that "There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

Conceivably, with respect to the educational seminar business, some of the expenditures that petitioner might have included in cost of goods sold might have been properly deductible under section 162; however, petitioners have made no such claim, and there is insufficient information in the record to allow us to make such a determination on our own.

s are to the Tax Court Rules of Practice and Procedure. This case presents the following issues: 1. Whether amounts claimed as advertising expenses by petitioner in 1986, 1987, 1988, and 1989 are ordinary and necessary business expenses pursuant to section 162. We hold that they are not. 2. Whether petitioner is liable for additions to tax for negligence and substantial understatement of income tax and for an accuracy-related penalty. We hold that petitioner is so liable. FINDINGS OF FACT Some o

ion. Further, the corporation's income from the law partnership was equal to the value of Mr. Souris' services, and, as passed through to him by the corporation, it became the basis for a deduction by the corporation under section 162(a)(1)4 as "a 4 Sec. 162. Trade or business expenses. (a) In general.--There shall be allowed as a (continued...) - 10 - reasonable allowance for * * * compensation for personal services actually rendered". There is no dispute between the parties that the amount was

After concessions by respondent, this Court must decide: (1) Whether petitioner wife's educational expenses are deductible under section 162; (2) whether petitioners are entitled to deduct home office expenses under section 280A; and (3) whether petitioners are liable for an accuracy-related penalty for negligence under section 6662(a).

The determination of whether an expenditure satisfies the requirements for deductibility under section 162 is a question of fact.

he substantiation of payments, we preface the following discussion with the observation that petitioners have the burden of showing that their payments for rent and management services were ordinary and necessary business expenses deductible under section 162. Rule 142(a). Issue 2. Rental Payments Section 162 provides, in pertinent part: SEC. 162(a). In General.--There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on

ts reasonable business needs and NITCO was availed of 1This Court granted petitioners' motion to consolidate. - 2 - to avoid income tax with respect to its shareholders. 2. Held, further, most of the legal expenses in issue are not deductible under sec. 162, I.R.C. 3. Held, further, M had constructive dividend income. 4. Held, further, NITCO is liable for the additions to tax. 5. Held, further, M and M’s wife are liable for the additions to tax. David J. Duez, Gail H. Morse, and Roger W. Wenthe,

We hold that petitioners may deduct all of the above stated items, except the babysitting expense. Petitioners introduced a form dated December 19, 1991, which showed that Mr. Frank drove 640 miles to Oregon to discuss estate planning issues with his brother, Earl W. Frank. Petitioners have not shown that the primary purpose of the trip w

ployee's expenditure is not "necessary". Heidt v. Commissioner, 274 F.2d 25, 28 (7th Cir. 1959), affg. T.C. Memo. 1959-31; Lucas v. Commissioner, 79 T.C. 1, 7 (1982). Petitioner is not entitled to deduct the expenses he incurred as an employee under section 162. As we stated in Stolk v. Commissioner, 40 T.C. 345, 356 (1963), affd. per curiam 326 F.2d 760 (2d Cir. 1964): "These charges were business expenses of the * * * [corporations] and petitioner cannot convert * * * [the corporate] expenses

ed Assemblies of God missionary, was an independent contractor in 1992. OPINION Petitioners contend that petitioner was an independent contractor and, as such, was entitled to deduct the full amount of his business expenses on Schedule C pursuant to section 162. Respondent determined that petitioner was an employee during 1992. Petitioners bear the burden of proving that respondent's - NEXTRECORD - determination is not correct. Rule 142(a); Welch v. Helvering 290 U.S. 111, 115 (1933). Whether an

Section 162(a) provides "There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." The regulations promulgated under section 162 provide that only those expenses "directly connected with or pertaining to the taxpayer's trade or business" may be deducted.

he substantiation of payments, we preface the following discussion with the observation that petitioners have the burden of showing that their payments for rent and management services were ordinary and necessary business expenses deductible under section 162. Rule 142(a). Issue 2. Rental Payments Section 162 provides, in pertinent part: SEC. 162(a). In General.--There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on

We remarked that “the statute [section 162] was amended by the enactment of sections 419 and 419A to bring about that result in the case of contributions made after 1985”, Schneider v.

1987 and * * * 1988, petitioner fraudulently and with intent to evade tax deducted personal items as business expenses, deducted items she could not substantiate and claimed expenses that were not ordinary and necessary business expenses pursuant to section 162. Paragraph 33. During 1987 and 1988, the petitioner engaged in a pattern of conduct which demonstrates that she intentionally and knowingly failed to report substantial income in both years. - 12 - Paragraph 36. Petitioner's failure to re

The regulations promulgated under section 162 clarify that only those ordinary and necessary business expenses "directly connected with or pertaining to the taxpayer's trade or business" may be deducted.

here. See Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985). In fact, the record does not even persuade us that Hamalee incurred the claimed expenditures, or, if it had, that these expenditures were ordinary and necessary business expenses under section 162. Whereas petitioners would have us find, based solely on the testimony of Ms. Chong, that Hamalee incurred the purported expenditures in the amounts that she so claimed, we refuse to do so. Ms. Chong's testimony on this issue is unsupport

(2) Whether petitioner is entitled to exclude from gross income, or deduct under section 162, in its fiscal years ended June 30, 1989, and June 30, 1990, the respective amounts of $1,160,673.58 and $2,510,135.98 as incentives to its dealerships.

For purposes of section 162, generally "home" (or tax home) means the vicinity of the taxpayer's principal place of business or employment.

In that regard, section 162 governs the deductibility of business expenses.

ness expense. Based on the record, we conclude that petitioners' trips to Hayward were primarily for personal activities, and, therefore, they are not entitled to deduct the travel expenses to Hayward or the expenses related to the condominium under section 162. Petitioner testified that he only visited Hayward during the summer months. Petitioner testified that he played golf "usually with a prospect or a client", implying that he also played golf without clients. Petitioner's wife testified th

The regulations promulgated under section 162 clarify that only those ordinary and necessary business expenses "directly connected with or pertaining to the taxpayer's trade or business" may be deducted.

rental expense of the Bridgeford property will be sustained. Education Expense - 8 - Petitioner asserts that the cost of the Big League Sales Course and associated expenditures were deductible as ordinary and necessary business expenses pursuant to section 162. Respondent contends that the course cost and the associated expenses were personal expenses and not ordinary and necessary business expenses and, therefore, were not deductible pursuant to section 262. Section 162 allows a deduction for "

Section 162 provides taxpayers with deductions for all "ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". Section 212 allows deductions for all ordinary and necessary expenses paid or incurred during the taxable year-- (1) for the production or collection of income; (2) for the managemen

here. See Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985). In fact, the record does not even persuade us that Hamalee incurred the claimed expenditures, or, if it had, that these expenditures were ordinary and necessary business expenses under section 162. Whereas petitioners would have us find, based solely on the testimony of Ms. Chong, that Hamalee incurred the purported expenditures in the amounts that she so claimed, we refuse to do so. Ms. Chong's testimony on this issue is unsupport

was not “an insurance company” for Federal income tax purposes. And we held that amounts paid to it by Sheperd Royalty, a passthrough entity owned by the Sheperds, the individual petitioners, “did not constitute ‘insurance premiums’ deductible under section 162.” Id. at *37. Because the cases were “bereft of evidence pointing to the exist- ence of true ‘insurance,’” we sustained respondent’s deficiency determi- nations for 2012. Id. at *49–50. We also sustained the imposition of a 20% penalty fo

Section 162 Analysis A. Trade or Business Section 162(a) allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. To be “ordinary,” an expense must be a common or frequent occurrence for the taxpayer’s type of business. See Deputy v. du Pont, 308 U.S. 488, 495 (1940). To b

Section 183(c) defines an “activity not engaged in for profit” as “any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212.” “The determination whether an activity is engaged in for profit is to be made by reference to objective standards, taking into account all of the facts and circumstances of each case.” Estate of Power v.

Section 183, however, limits such deductions in the case of an activity engaged in by an individual or an S corporation that is not engaged in for profit, except (1) where such deductions would be allowed without regard to whether the activity was engaged in for profit or (2) to the extent that the gross income from such activity exceed

Norwich argues that the expenditure was an ordinary and necessary business expense under section 162, or in the alternative, a deductible loss under section 165.

Compare § 162 (providing a deduction for ordinary and necessary business expenses incurred within a taxable year), with § 263 (prohibiting a deduction for capital expenditures made within the taxable year). See generally INDOPCO, Inc. v. Commissioner, 503 U.S. 6 Respondent did not rely on Notice 2003-18 in making his determination with respect to the tax l

etermine the taxpayer’s correct tax liability. I.R.C. § 6001; Hradesky, 65 T.C. at 89–90. II. Unreimbursed Employee Expenses Generally, a taxpayer may deduct unreimbursed employee business expenses as an ordinary and necessary business expense under section 162. Lucas v. Commissioner, 79 T.C. 1, 6 (1982); Primuth v. Commissioner, 54 T.C. 374, 377 (1970). Miscellaneous itemized deductions are allowed only to the extent that, in the aggregate, they exceed 2% of adjusted gross income. I.R.C. § 67(a

In the first Motion respondent contends that the IRS complied with the requirements of section 6751(b)(1) by Served 05/20/25 2 [*2] securing timely supervisory approval of the penalties at issue.1 In the second Motion respondent contends Hancock is not entitled to de- ductions under section 162 for expenses incurred in connection with the easement transaction.

Deductions Section 162 generally allows a taxpayer to deduct all ordinary and necessary expenses paid or incurred by the taxpayer in carrying on a trade or business.

Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including traveling expenses while away from home in the pursuit of a trade or business. See § 162(a)(2). The performance of services as an employee generally constitutes a trade or business. Se

without actual efforts to sell the products[] is insufficient to constitute carrying on a trade or business for purposes of section 162.”), aff’g 86 T.C.

Finally, we consider whether the Youngs engaged in the Pecandarosa Ranch activity for profit within the meaning of section 183.

Because none of these matters arose from petitioner’s Schedule C business activity, they are not deductible as section 162 ordinary and necessary expenses.

Section 162 Expenses 1. Advertising Expense Petitioner claimed a deduction of $1,479 for advertising expenses. To support this deduction she submitted a purported invoice from Tintash showing a $1,479 balance due for “business card design and bro- chure for BD.” At trial petitioner did not explain the meaning of “BD.” The invoice does not mention M

In contrast, section 263(a)(1) generally forbids a deduction for “[a]ny amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate.” The principal difference between classifying a payment as a deductible expense under section 162 or a capital expenditure under section 263 concerns the timing of the taxpayer’s recovery of the cost.

45, 46 n.3 3 [*3] expenses Surface Engineering incurred during the years at issue through the purported microcaptive insurance arrangement constitute ordinary and necessary business expenses deductible under section 162; (3) if not, whether the payments by Surface Engineering should be deemed accumulated earnings and profits and subject to tax as subpart F income of Risk & Asset for tax year 2017 under sections 951(a)(1)(A) and 965; and (4) whether petitioners are liable for accuracy- related pe

Section 162 allows deductions for trade and business expenses. Section 62(a)(1) allows deductions for those expenses to be made from gross income when computing adjusted gross income (AGI) except for those expenses incurred by a taxpayer as an employee. An employee is not permitted to deduct trade and business expenses unless subject to an enumerat

or 2012 she reported consulting income of $189,225, COGS of $130,910, and business expenses of $55,568, generating a profit of $2,747. Respondent accepts that petitioner’s consulting activities consti- tuted a “trade or business” with the meaning of section 162. However, he contends that petitioner failed to substantiate her reported COGS and her reported expenses, several of which were subject to the strict substantiation requirements of section 274. 9 [*9] A. COGS COGS is an offset subtracted

“the value of the contributed property . . . 19 [*19] was greater than $0.” The FPAA disallowed the $665,500 deduc- tion for “other expenses” on the ground that Corning Place had not sub- stantiated that those expenses qualified for deduction under section 162. Finally, the FPAA determined a 40% penalty for a “gross valuation mis- statement” under section 6662(h) and (in the alternative) a 20% penalty under other provisions of sections 6662 and 6662A. Petitioner timely petitioned for readjustmen

Under section 274(d), a taxpayer must meet stricter substantiation requirements to deduct certain expenses under section 162, including expenses with respect to the business use of any listed property (such as a passenger automobile).

ce did not exist during 2012, and because neither CCFC nor CCFC Insurance was organized or regulated as an insurance company during 2012, the $1,099,900 that Sheperd Royalty paid cannot possibly have constituted “insurance premiums” deductible under section 162. RMIC, the putative reinsurer, was incorporated in December 2012 as an ordinary domestic corporation in the Sac and Fox Nation. As noted above, the Sac and Fox Nation has no insurance regulatory au- thority. There is no credible evidence

Introduction In general, section 162 allows a deduction for “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” When called upon by the Commissioner, a taxpayer must substantiate his expenses.

Business Expenses Under Section 162 As an alternative position, Mr.

Gasoline Deduction Section 162 generally allows a deduction for the ordinary and necessary expenses of carrying on a trade or business.

No deductions under section 162 shall be allowed for “any traveling expense (including meals and lodging while away from home),” or “listed property,” as defined in section 280F(d)(4), “unless the taxpayer substantiates [them] by adequate records or by sufficient evidence corroborating the taxpayer’s own statement.” § 274(d)(1), (3).

Section 183(c) defines an “activity not engaged in for profit” as “any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212.” Unless otherwise stipulated by the parties, an appeal in this case would lie in the U.S.

It is not a deduction and so is not subject to the limitations of section 162, which generally denies a deduction for business expenses unless they are “ordinary and necessary” for the business in question.

Vehicle Expenses Under section 274(d), taxpayers must meet strict substantiation requirements to deduct certain expenses under section 162, including expenses for the use of “listed property” as defined in section 280F(d)(4), such as passenger automobiles.

Vehicle expenses are subject to both section 162 and the stricter substantiation requirements of section 274(d).

llegal Sale of Drugs,” provides: No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

Additionally, respondent did not consider the amount paid to Ms. Osman a business expense because of his erroneous view that the amount was not included on the Form 1040. But, as previously discussed, TM Transportation issued Ms. Osman a Form 1099–NEC, and later issued a corrected Form 1099–NEC reflecting that $12,428 was paid to Ms. Osman.1

Schedule C Business Expenses Section 162 generally allows a deduction for “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” Boyd v.

Rental Expense Deductions Section 162 permits taxpayers to deduct all ordinary and necessary business expenses paid or incurred during the taxable year.

None of these penalties will be imposed where the taxpayer had “reasonable cause.” 20 We recognize that businesses often can deduct expenses under section 162 that an individual might deduct under section 212.

The determination of whether an expense satisfies the requirements of section 162 is a question of fact.

113, but it must also be “directly connected with or pertaining to the taxpayer’s trade or business,” Treas. Reg. § 1.162-1(a). On the other hand, “personal, living, or family expenses” are not deductible. § 262(a). Section 262 takes precedence over section 162. Commissioner v. Idaho Power Co., 418 U.S. 1, 17 (1974); Sharon v. Commissioner, 66 T.C. 515, 522–23 (1976), aff’d per curiam, 591 F.2d 1273 (9th Cir. 1978). Consequently, if the origins of petitioner’s claimed deductions are personal as

for purposes of parts I and II of subchapter N of chapter 1 (sections 861–898) and chapter 3 (the withholding rules provided in sections 1441 through 1464). 21 management expenses as ordinary and necessary business expenses under the predecessor of section 162. The Commissioner accepted that the expenses were ordinary and necessary. He also accepted that the taxpayer’s real estate activities constituted a trade or business. But he disallowed that portion of the expenses allocable to the taxpayer

nstitute a “trade or business.” See Primuth v. Commissioner, 54 T.C. 374, 377 (1970); Ayria v. Commissioner, T.C. Memo. 2022-123, at *4. Generally, taxpayers may deduct unreimbursed employee expenses as ordinary and necessary business expenses under section 162. Lucas v. Commissioner, 79 T.C. 1, 6 (1982). The deduction for unreimbursed employee expenses is a miscellaneous itemized deduction. §§ 67(b), 63(d)(1), 62. Miscellaneous itemized deductions are allowed only to the extent that, in the agg

§ 1.164-2(f) (providing that excise taxes may constitute deductible expenses under section 162 or 212); Treas.

Under section 183(a), individuals are not allowed a deduction attributable to an activity “if such activity is not engaged in for profit” except to the extent provided by section 183(b). Section 183(b) allows deductions that would have been allowable had the activity been engaged in for profit but only to the extent of gross income deri

Under section 183(a), individuals are not allowed a deduction “if such activity is not engaged 3 Petitioners made various arguments regarding the Administrative Procedure Act (APA), 5 U.S.C. §§ 551–59. A deficiency case in the Tax Court is not a review of an agency action pursuant to the APA. See Ax v. Commissioner, 146 T.C. 153 (2016).

Schedule C Deductions Section 162 allows a taxpayer to deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Section 162 Section 162(a) allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. An ordinary and necessary expense is one which is appropriate and helpful to the taxpayer’s business and results from an activity that is common and accepted practice in the business. A

nly to the extent that it is reasonable in amount. Audano v. United States, 428 F.2d 251, 256–57 (5th Cir. 1970); Ciaravella v. Commissioner, T.C. Memo. 1998-31. The requirement of reasonableness is inherent in the phrase “ordinary and necessary” in section 162. Fuhrman v. Commissioner, T.C. Memo. 2011-236, slip op. at 6. The reasonableness concept has particular significance in dealings between related parties. Id. I. Rent Expenses Respondent argues that petitioners have substantiated only 12 a

Expenses Section 162 allows a taxpayer to deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

However, a taxpayer may not deduct expenses incurred in connection with activities not engaged in for profit, such as activities primarily carried on as a sport, a hobby, or for recreation, except to the extent provided by section 183(b). See I.R.C. § 183(a); Treas. Reg. § 1.183-2(a). Section 183(b) allows a taxpayer to deduct expenses

Under section 274(d), taxpayers must meet stricter substantiation requirements to deduct certain expenses under section 162, including expenses for the use of listed property as defined in section 280F(d)(4), such as passenger automobiles.

Rule references are to the Tax Court Rules of Practice and Pro- cedure. 2 The FPAA also disallowed a $1,087,819 business expense deduction on the ground that it was a “nondeductible syndication expense,” see § 709, and lacked sub- stantiation, see § 162. That adjustment remains at issue. Respondent has also re- served the right to advance additional theories to support disallowance of the charita- ble contribution deduction. 3 Before its repeal, TEFRA (the Tax Equity and Fiscal Responsibility A

–5. We need not address the question of whether Mr. Di Giorgio’s losses are passive if he failed to establish that his rental real estate activities generated a loss. To do so, Mr. Di Giorgio must establish that he incurred deductible expenses under section 162. Mr. Di Giorgio did not specifically testify about expenses he incurred in connection with his reported rental properties, and he cites no documentary evidence of the reported expenses. Further, he did not provide any evidence from which

The Gages argue that they are entitled to deduct the $875,000 settlement payment under section 162, which allows the deduction of ordinary and necessary business expenses.

33 See Respondent’s First Amendment to Answer, at 1 (“Hyatt Corporation must report the Program income in the year received or accrued under IRC § 448 and IRC § 451, and the expenses of the Program are deductible per IRC § 162 and IRC § 461.”); Respondent’s Pretrial Memorandum, at 53 (“[I]f the Court were to determine that Hyatt Corporation must recognize the Program Revenue and Program expenses beginning in the taxable year 2009 but section 481 did not apply to this change in reporting, Hyatt C

, including a reasonable allowance for salaries or other compensation for personal services actually rendered. § 162(a)(1). Ordinarily, the deductibility of compensation paid or incurred by an employer to or on account of an employee is governed by section 162. However, if amounts are contributed by an employer under a pension, annuity, stock bonus, or profit-sharing plan, or under any plan of deferred compensation, section 404(a) governs the deductibility of such amounts and prescribes limitati

Schedule C Business Expenses Section 162 generally allows a deduction for “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” Boyd v.

ther” business expenses of $6,825, $14,088, and $15,183, respectively. As an initial matter, the Harwoods have failed to explain the nature of the expenses reported, much less detail how they qualify as ordinary and necessary business expenses under section 162. Although the Harwoods have offered a few receipts for car maintenance and repair during the years at issue, we cannot recognize such expenses (even if the Harwoods had shown them to be business expenses) as the Harwoods claimed vehicle e

Section 162 generally allows a deduction for “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” Boyd v. Commissioner, 122 T.C. 305, 313 (2004). The taxpayer bears the burden of proving that expenses were of a business nature rather than personal and that they were ordinary and ne

See Rule 142(a). Accordingly, the burden of proof remains on her on all factual issues. II. Petitioner’s Unreimbursed Business Expense Deductions A taxpayer may deduct unreimbursed employee expenses as ordinary and necessary business expenses under section 162. Lucas v. Commissioner, 79 T.C. 1, 6 (1982). An employee cannot deduct such expenses to the extent that the - 9 - employee is entitled to reimbursement for them. Id. at 7. An employee of the Air Force may incur unreimbursed employee busin

y for the borrowed amount. § 465(b). Petitioners failed to show that any amounts in respect of their rental real estate activities were at risk. C. Section 469 Limitations Taxpayers may deduct costs for certain business and investment expenses under section 162. If the taxpayer is an individual, section 469 generally disallows any passive activity loss deduction for the taxable year and treats it as a deduction or credit for the next taxable year. § 469(a) and (b). A passive activity loss is def

ords for those expenses. For 2007, the Commissioner allowed deductions for all expenses Mr. Clemons reported on Schedule C, and Mr. Clemons provided no records of additional expenses. For 2008 and 2009, Mr. Clemons may not deduct his expenses under section 162. Section 162 allows a deduction only for expenses incurred in carrying on a trade or business. The test for whether a taxpayer is engaged in a trade or business is whether his primary purpose and intention in engaging in the activity is to

ement entered into before such date) and thus is not applicable to this case. See id. § 13306(a)(2), 131 Stat. at 2127. 6 We note that the Commissioner has recently promulgated and adopted new rules addressing the deductibility of disgorgement under section 162. See Treas. Reg. § 1.162-21(e)(4)(B) (as amended by T.D. 9946, 86 Fed. Reg. 4970, 4984 (Jan. 19, 2021)). Those rules apply to taxable years beginning on or after January 19, 2021 (unless paid or incurred under any order or agreement pursu

Under section 274(d), the taxpayer must meet stricter substantiation requirements to deduct certain expenses under section 162, including expenses for the use of listed property (as defined in section 280F(d)(4)) such as passenger automobiles.

10 [*10] expenditure satisfies the requirements for deductibility under section 162 is a question of fact.

Clothing costs are 6 deductible as ordinary and necessary business expenses under section 162 only if (1) the clothing is of a type specifically required as a condition of employment, (2) it is not adaptable to general use as ordinary clothing, and (3) it is not so worn.

2 The FPAA also disallowed, for lack of substantiation, a $665,500 deduction for business expenses, see § 162, and determined various penalties, see §§ 6662(a), (b)(1)–(3), (e), and (h), 6662A.

Under section 162 the term “home” does not have its usual and ordinary meaning. Henderson v. Commissioner, 143 F.3d 497, 499 (9th Cir. 1998), aff’g T.C. Memo. 1995-559. For purposes of section 162(a)(2), a taxpayer’s home generally means the vicinity of his principal place of employment. Mitchell, 74 T.C. at 581. As an exception to this general rule, a t

Section 162 generally allows a taxpayer to deduct ordinary and necessary expenses paid or incurred in carrying on a trade or business. Special rules apply, however, to losses from passive activities. In the case of individual taxpayers, section 469 disallows a deduction for “passive activity loss.” § 469(a)(1), (b). A “passive activity loss” is the

As a general rule, incidental repairs to an investment property may be deducted under section 162 by a cash basis taxpayer when paid, while capital improvements are added to the investment property’s basis and recovered upon the sale of the property under section 263.

See § 161 (providing that the deductions allowed under part VI, which includes section 162, are subject to the exceptions provided in part IX, which includes section 263).

Both Chris and John Dowson claimed section 162 deductions on their 2012 2 Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all Rule references are to the Tax Court Rules of Practice and Procedure, and all regulation references are to the Code of Federal Regulations, Title 26 (Treas.

The substantiation requirements of section 162 also apply to business expense deductions for S corporations.

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question of fact.

For expenses to be deductible under section 162, the expenses must - 8 - [*8] relate to a trade or business functioning when the expenses were incurred.

Deduction for Compensation Paid in the Form of a Partnership Interest Section 83(h) allows a deduction under section 162 to “the person for whom were performed the services in connection with which * * * property was transferred”.

Consulting Payments Section 162 allows the deduction of all ordinary and necessary business expenses.

different approach that led him to conclude that the value of Jackson’s image and likeness was just over 41 In general (and subject to several rules) businesses are able to deduct business expenses for the year the expenses are incurred. See, e.g., sec. 162. But this isn’t always the case. A taxpayer who buys an intangible asset that will produce income over several years must deduct that cost over several years--a concept known as amortization. See sec. 1.167(a)-3, Income Tax Regs.; Sally M. J

indirect costs. See sec. 1.263A-1(e)(3), Income Tax Regs. Sec. 263A, however, allows a taxpayer to include in its COGS only expenses that are otherwise deductible. Sec. 263A(a)(2). Sec. 280E prohibits taxpayers from deducting business expenses under sec. 162. Because Purple Heart’s business expense deductions are disallowed by sec. 280E, sec. 263A does not allow it “to capitalize indirect costs [into its COGS] that it wouldn’t otherwise be able to deduct.” Patients Mut., 151 T.C. at 209. - 25 -

A taxpayer must also satisfy the following requirements to deduct a travel- related expense under section 162: (1) the expense must be reasonable and not “lavish or extravagant under the circumstances”; (2) the expense must be incurred “while away from home”; and (3) the expense must be incurred in the pursuit of a trade or business.

Consulting Payments Section 162 allows the deduction of all ordinary and necessary business expenses.

ction all the ordinary and necessary expenses paid or incurred * * * in carrying on any trade or business.” But taxpayers do not have an absolute entitlement to deduct all business-related expenses they incur. Numerous regulations limit the reach of section 162. See, e.g., sec. 1.162-2(e), Income Tax Regs. (disallowing deductions for commuting expenses); sec. 1.162-9, Income Tax Regs. (disallowing deductions for certain employment bonuses). Taxpayers must also substantiate - 50 - their deduction

In this case the “statutory provision[s]” are section 162, which, in general, allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, see Boyd v.

The firm claims this trip was to market its services--“schmoozing a client.” Here they are: Expense Amount Delta plane ticket $429.40 Dining, entertainment, & petty cash 284.82 Hotel 306.28 Parking11 102.75 Total 1,123.25 Section 162 allows a deduction for ordinary and necessary business expenses, but taxpayers have the burden of proving their right to deductions, see INDOPCO, Inc.

No deductions under section 162 shall be allowed for “listed property”, as defined in section 280F(d)(4), “unless the taxpayer substantiates [the expenses] by adequate records or by sufficient evidence corroborating the taxpayer’s own - 6 - [*6] statement”.

Consulting Payments Section 162 allows the deduction of all ordinary and necessary business expenses.

The determination of whether an expense satisfies the requirements of section 162 is a question of fact.

Consulting Payments Section 162 allows the deduction of all ordinary and necessary business expenses.

Whether an expense is deductible under section 162 is essentially a question of fact.

Consulting Payments Section 162 allows the deduction of all ordinary and necessary business expenses.

y Petitioner reported $83,041 and $98,818 in Schedule C expenses on her 2013 and 2014 returns, respectively. Petitioner contends that these expenses relate to her acting career and are ordinary and necessary business expenses within the meaning of section 162. Respondent disallowed deductions for these expenses on the basis that petitioner cannot show that she engaged in her acting activity to make a profit. Petitioner does not allege, nor has she proven, that the burden of proof should shift to

162.47(e) (2000)). By contrast, the regulations under section 7623 describe in detail the two types of determination available to the WBO when it declines to issue an award (rejection and denial), as well as the circumstances that justify each type of determination. Second, while the D.C. Circuit viewed the letter in Tourus essentially as sile

The issues for decision are whether petitioner: (1) is entitled to deduct certain unreimbursed employee business expenses for 20142 and (2) is entitled to deduct tax preparation fees under section 162 for 2014.

imed by the Ryders for Ryder Ranch Co., LLC. He questions whether the Ryders materially participated in the ranch business and whether that business substantiated certain expenses. Here is a summary of these contested losses: Reason for disallowance Sec. 162 (Lack of Sec. 469 Year Adjustment substantiation) (Passive loss) 2003 $531,583 X 2004 927,497 X 2005 1,054,725 X X 2006 979,454 X X 2007 575,878 X Material Participation. The Commissioner argues that any loss sustained by Ryder Ranch is pass

Section 162 Deduction A subchapter C corporation, such as petitioner, is subject to Federal income tax on its taxable income, which is its gross income less allowable deductions. Secs. 11(a), 61(a)(1) and (2), 63(a). A corporation may deduct all the ordinary and necessary expenses paid or incurred during the tax year in carrying on any trade or bus

The determination of whether an expenditure satisfies the requirements for deductibility under section 162 is a question of fact.

y income under sec. 61. As discussed supra note 15, respondent also improperly relies on a post-TCJA version of sec. 1221 to support his position. -43- [*43] same meaning under section 1402(a), defining “net earnings from self-employment,” as under section 162. Sec. 1402(c); Bot v. Commissioner, 118 T.C. 138, 146 (2002), aff’d, 353 F.3d 595 (8th Cir. 2003). “Trade or business” under section 162 has been interpreted to mean an activity conducted “with continuity and regularity” and with the prima

Section 162 allows a deduction for all ordinary and necessary business expenses, but section 183 bars any deduction for an “activity * * * [that] is not engaged in for profit.” Section 183 can be hugely consequential for a taxpayer. If he doesn’t engage in an activity for profit, then he can deduct section 162 expenses only to the extent of his gro

Consulting Payments Section 162 allows the deduction of all ordinary and necessary business expenses.

Section 274(d) provides that no deduction or credit under section 162 or 212 shall be allowed for these expenses unless the taxpayer substantiates the amount, time and place, business purpose, and business relationship to the taxpayer of the person receiving the benefit for each expenditure by adequate records or sufficient evidence corroborating his own statements.

iness, the taxpayer is in the province of section 195. See Weaver v. Commissioner, at *5 (“Implicit in the foregoing definitions is the concept that a taxpayer must in fact be ‘carrying on’ a trade or business for expenditures to be deductible under section 162. This limitation is made explicit in section 195[.]”). Section 195(a) provides the general rule that no current deduction is allowed for start-up expenditures. See Yapp v. Commissioner, T.C. Memo. 2018-147, at *13, aff’d, 818 F. App’x 743

Legarcie cannot deduct her farming-activity losses - 12 - [*12] under section 162 for two reasons; one, she lacked a profit motive, and, two, her business had not during 2012 and 2013 yet commenced.

The determination of whether an expenditure satisfies the requirements for deductibility under section 162 is a question of fact.

1985) (explaining that “one who has no principal place of business or a permanent residence is considered an itinerant” who “may not deduct expenses under * * * [section 162]”), aff’g T.C.

The determination of whether an expense satisfies the requirements of section 162 is a question of fact.

Whether an expenditure satisfies the requirements for deductibility under section 162 generally is a question of fact.

The term “activity not engaged in for profit” is defined by section 183(c) as “any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212.” An activity overcomes the limitation set forth in section 183 if it “was entered into with the dominant hope and intent of realizing a profit.” Brannen v.

Consulting Payments Section 162 allows the deduction of all ordinary and necessary business expenses.

The firm claims this trip was to market its services--“schmoozing a client.” Here they are: Expense Amount Delta plane ticket $429.40 Dining, entertainment, & petty cash 284.82 Hotel 306.28 Parking11 102.75 Total 1,123.25 Section 162 allows a deduction for ordinary and necessary business expenses, but taxpayers have the burden of proving their right to deductions, see INDOPCO, Inc.

imed by the Ryders for Ryder Ranch Co., LLC. He questions whether the Ryders materially participated in the ranch business and whether that business substantiated certain expenses. Here is a summary of these contested losses: Reason for disallowance Sec. 162 (Lack of Sec. 469 Year Adjustment substantiation) (Passive loss) 2003 $531,583 X 2004 927,497 X 2005 1,054,725 X X 2006 979,454 X X 2007 575,878 X Material Participation. The Commissioner argues that any loss sustained by Ryder Ranch is pass

Consulting Payments Section 162 allows the deduction of all ordinary and necessary business expenses.

imed by the Ryders for Ryder Ranch Co., LLC. He questions whether the Ryders materially participated in the ranch business and whether that business substantiated certain expenses. Here is a summary of these contested losses: Reason for disallowance Sec. 162 (Lack of Sec. 469 Year Adjustment substantiation) (Passive loss) 2003 $531,583 X 2004 927,497 X 2005 1,054,725 X X 2006 979,454 X X 2007 575,878 X Material Participation. The Commissioner argues that any loss sustained by Ryder Ranch is pass

imed by the Ryders for Ryder Ranch Co., LLC. He questions whether the Ryders materially participated in the ranch business and whether that business substantiated certain expenses. Here is a summary of these contested losses: Reason for disallowance Sec. 162 (Lack of Sec. 469 Year Adjustment substantiation) (Passive loss) 2003 $531,583 X 2004 927,497 X 2005 1,054,725 X X 2006 979,454 X X 2007 575,878 X Material Participation. The Commissioner argues that any loss sustained by Ryder Ranch is pass

imed by the Ryders for Ryder Ranch Co., LLC. He questions whether the Ryders materially participated in the ranch business and whether that business substantiated certain expenses. Here is a summary of these contested losses: Reason for disallowance Sec. 162 (Lack of Sec. 469 Year Adjustment substantiation) (Passive loss) 2003 $531,583 X 2004 927,497 X 2005 1,054,725 X X 2006 979,454 X X 2007 575,878 X Material Participation. The Commissioner argues that any loss sustained by Ryder Ranch is pass

Consulting Payments Section 162 allows the deduction of all ordinary and necessary business expenses.

Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Sec. 162(a); sec. 1.162-1(a), Income Tax Regs. An expense is "ordinary" ifit is "normal, usual, or customary" in the taxpayer's trade or business or it arises from a transaction "ofcommon or frequen

roducers) and acquisition costs (for resellers). Sec. 1.263A-1(e)(3), Income Tax Regs. Section 263A includes in COGS only expenses that are otherwise deductible. Sec. 263A(a)(2). Section 280E prohibits taxpayers from taking business deductions under section 162. Therefore, section 263A does not allow Richmond to capitalize indirect costs into COGS that it would not otherwise be able to deduct. See Patients Mut., 151 T.C. at 209. Richmond contends that it was a producer for purposes ofsections 26

Deductions Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Because petitioner failed to file tax returns for the years at issue and has not claimed any itemized deductions, he is allowed for each year only the standard deduction and deductions for personal exemptions in addition to the section 162 deduction respondent allowed.

17, 2019) (receiving over 7,700 comments on a proposed Treasury regulation dealing with section 162, 164, and 170A); 84 Fed.

Schedule F Deductions Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Deductions Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Whether an expenditure satisfies the requirements for deductibility under section 162 generally is a question offact.

The term "trade or business", for purposes ofthe definition ofnet earnings from self-employment, has the same meaning as when used in section 162, except that the performance ofservices by an individual as an employee is not included in the term "trade or business".

- 5 - Discussion The issue for decision is whether, as petitioner contends, his expenses in 2012 and 2013 to prepare for producing and selling maple syrup and blueberries are deductible under section 162 as expenses ofa trade or business (or section 212 as expenses ofan income-producing activity), or, as respondent contends, nondeductible startup expenses under section 195.

Here, however, most ofthe expenses and income petitioner reported on Schedule C were shown to be a factual sham as described by respondent. Petitioner's tax preparer, Mr. Contract, used the approach ofreporting equal amounts ofincome and travel expenses on Schedule C in an attempt to place petitioner in a business setting. Petitioner was

Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Such expenses must be directly connected with or pertain to the taxpayer's trade or business. Sec. 1.162-1(a), Income Tax Regs. Generally, no 7(...continued) the option generally has an adjusted b

Business Expense Adjustments Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

The determination ofwhether an expenditure satisfies the requirements ofsection 162 is a question offact.

Self-Employed Health Insurance Expense Deduction Section 162(1)(1) allows a self-employed individual to deduct medical insurance costs for the taxable year.

Schedule C Deductions Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Such expenses must be directly connected with or pertain to the taxpayer's trade or business. Sec. 1.162-1(a), Income Tax Regs. Generally, no 7(...continued) the option generally has an adjusted b

Business Deductions, Generally Section 162 allows taxpayers to deduct "ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business."¹° This includes deductions for unreimbursed employee business expenses that are ordinary and necessary to the business ofbeing an employee." A.

Schedule E Deductions Section 162 allows a deduction for all ordinary and necessary business expenses paid or incurred during the taxable year in carrying on any trade or business.

That section provides that deductions for certain expenses otherwise allowable under section 162 or 212, including travel, meals and entertainment, automobile, and computer or peripheral equipment, shall not be allowed "unless the taxpayer substantiates [them] by adequate records or by sufficient evidence corroborating the t

truck expenses were not met. Therefore, petitioner husband is not entitled to a deduction for his car expenses. IV. Unreimbursed Employee Business Expenses A taxpayer may deduct unreimbursed employee business expenses as ordinary and necessary under section 162. Lucas v. Commissioner, 79 T.C. 1, 6-7 (1982). Miscellaneous itemized deductions, such as the deduction for unreimbursed employee business expenses, are allowed only to the extent that the total ofsuch deductions exceeds 2% ofadjusted gro

Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Such expenses must be directly connected with or pertain to the taxpayer's trade or business. Sec. 1.162-1(a), Income Tax Regs. Generally, no 7(...continued) the option generally has an adjusted b

Section 274(d) tacks more stringent substantiation requirements onto section 162 in cases where the line between personal and business expenses is blurred.

ment by showing, for example, that he is expected to bear these costs. Id. An expense for which the taxpayer is entitled to (but does not claim) reimbursement from his employer is generally not considered "necessary" and thus is not deductible under section 162. Orvis v. Commissioner, 788 F.2d 1406, 1408 (9th Cir. 1986), afg T.C. Memo. 1984-533; Podems v. Commissioner, 24 T.C. at 22-23. Mr. Bagdan's employer, On Power Demand, did have a reimbursement policy that provided reimbursements to Mr. Ba

decide are (1) whether the amounts received by Syzygy as premiums are excluded from its gross income and (2) whether the individual petitioners are entitled to the benefit ofdeductions taken by their S corporations - 27 - [*27] for insurance under section 162. Petitioners argue that the premiums received by Syzygy were payments for insurance and, therefore: (1) these premiums are excluded from Syzygy's income under section 831(b) and (2) the individual petitioners are entitled to deduct the pre

Section 274(d) tacks more stringent substantiation requirements onto section 162 in cases where the line between personal and business expenses is blurred.

decide are (1) whether the amounts received by Syzygy as premiums are excluded from its gross income and (2) whether the individual petitioners are entitled to the benefit ofdeductions taken by their S corporations - 27 - [*27] for insurance under section 162. Petitioners argue that the premiums received by Syzygy were payments for insurance and, therefore: (1) these premiums are excluded from Syzygy's income under section 831(b) and (2) the individual petitioners are entitled to deduct the pre

have yet been issued. In determining when an activity becomes an "active trade or business" for the purpose ofsection 195(a), this Court has sought guidance from cases interpreting the "engaged in a trade or business" requirement for deduction under section 162. Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987); see Yapp v. 6Sec. 7491(a) provides that if, in any Court proceeding, "a taxpayer introduces credible evidence with respect to any factual issue relevant to ascertaining the liability o

No deductions under section 162 shall be allowed for "listed property", as defined in section 280F(d)(4), "unless the taxpayer substantiates [them] by adequate records or by sufficient evidence corroborating the taxpayer's own - 13 - [*13] statement".

Section 183 Generally, section 162 allows a taxpayerto deduct ordinary and necessary business expenses incurred in carrying on a trade or business.

decide are (1) whether the amounts received by Syzygy as premiums are excluded from its gross income and (2) whether the individual petitioners are entitled to the benefit ofdeductions taken by their S corporations - 27 - [*27] for insurance under section 162. Petitioners argue that the premiums received by Syzygy were payments for insurance and, therefore: (1) these premiums are excluded from Syzygy's income under section 831(b) and (2) the individual petitioners are entitled to deduct the pre

Holding and Plano filed a consolidated Federal income tax return for 2012, in which a business expense deduction under section 162¹ was claimed for Plano's payment to Baird.

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

106 for both years at issue while Ms. Sarkin filed a Form 2106 for tax year 2013. - 9 - [*9] C deductions because respondent determined that the Schedule C activity did not meet the guidelines ofcarrying on a trade or business within the meaning of section 162. Further, respondent denied all ofpetitioners' deductions for moving expenses and employee business expenses and determined that petitioners are liable for accuracy-related penalties under section 6662(a). On January 5, 2016, petitioners t

Introduction Section 162 permits taxpayers to deduct all ordinary and necessary business expenses paid or incurred during the taxable year and specifically includes "traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit ofa trade or bus

Taxpayers have the burden to establish their entitlement to deductions under section 162, and must keep good records to do so.

The briefcites section 162 as follows: 26 U.S.

The Commissioner argues that BAI deducted this amount as a section 162 business expense on its original 2003 return and then, after the Commissioner allowed that deduction during the 2° We note that the Commissioner could have argued this item with the other items falling under the wrong-year-to-expense issue.

decide are (1) whether the amounts received by Syzygy as premiums are excluded from its gross income and (2) whether the individual petitioners are entitled to the benefit ofdeductions taken by their S corporations - 27 - [*27] for insurance under section 162. Petitioners argue that the premiums received by Syzygy were payments for insurance and, therefore: (1) these premiums are excluded from Syzygy's income under section 831(b) and (2) the individual petitioners are entitled to deduct the pre

This case presents a threshold question for the Schedule C business expense deductions: whether petitioner was engaged in a trade or business or an activity for the production ofincome with respect to his involvement in the Ghanaian farms or the rescue services that could give rise to deductible expenses under section 162 or 212(1).6 Respondent argues that petitioner was not engaged in a trade or business or an activity for the production ofincome.

A taxpayermay deduct reasonable expenses for meals and lodging while performing - 34 - [*34] donated services, provided that the taxpayer satisfies the "away from home" test under section 162 and the regulations thereunder.

Schedule C Deductions Section 162 allows a deduction for ordinary and necessary business expenses, but taxpayers have the burden ofproof.

Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred by the taxpayer in carrying on a trade or business; but personal, living, or family expenses are not deductible. Secs. 162(a), 262(a). A trade or business expense is ordinary ifit is normal or customary within a particular trade, business, or industry, and i

expenses paid in connection with operating a trade or business. Sec. 162(a); Boyd v. Commissioner, 122 T.C. 305, 313 (2004). It has long been recognized that a taxpayer's status as an employee may constitute a trade or business within the meaning ofsection 162. On the other hand, section 262(a) generally disallows a deduction for personal, living, or family expenses. 2Petitioner does not claim and the record does not demonstrate that the provisions ofsec. 7491(a) are applicable, and we proceed a

But personal, living, and family expenses are not deductible. Sec. 262. For an expenditure to be an ordinary and necessary business expense, generally the taxpayermust show a bona fide business purpose for the expenditure and a proximate relationship between the expenditure and the business ofthe taxpayer. S_e_e Challenge Mfg. Co. v. Comm

be made from gross income in computing adjusted gross income (AGI) except for those expenses incurred by a taxpayer as an employee. The parties agree that petitioners are entitled to deduct the settlement payment as a trade or business expense under section 162. However, they disagree as to whether the settlement payment should be deducted from gross income in computing petitioners' AGI." Respondent asserts that the settlement payment was RFI's expense because RFI was responsible for the work th

Therefore, ifdeductible at all under section 162, they were deductible under the cash method ofaccounting for the year when paid.

"An expenditure generally does not have independent and substantial importance to the distributing corporation ifit is not deductible under section 162." Gow v.

Section 162 Section 162(a) allows as a deduction all ordinary and necessary expenses paid or incurred in carrying on any activity that constitutes a trade or business. To ¹6With respect to an additional $800 cash deposit in petitioners' joint bank account, petitioners have rebutted the presumption that the deposit was income because a family member

Many ofpetitioners' K&W invoices were captioned "Personal", and petitioners offered little explanation for the business purpose oftheir various legal expenses. The records they provided show significant overlap between business and personal expenses. Petitioners incurred $13,328 in K&W legal fees for an "IRS and FOIA project", but they pr

ners' rental real estate losses are suspended until 2012, when they disposed ofthe Arizona and Idaho properties. - 30 - [*30] IV. Real Estate Expenses Petitioners argue that they are entitled to deduct their rental real estate expenses under either section 162 or 212. A taxpayermay deduct all ordinary and necessary expenses paid or incurred in a taxable year in carrying on any trade or business. Sec. 162(a). A taxpayer also may deduct all ordinary and necessary expenses paid or incurred in a tax

The Doyles' problem is that legal fees are deductible under section 162 only ifthey are for a claim that arose in connection with Doyle's trade or business.

1983); see also Rev.

decide are (1) whether the amounts received by Syzygy as premiums are excluded from its gross income and (2) whether the individual petitioners are entitled to the benefit ofdeductions taken by their S corporations - 27 - [*27] for insurance under section 162. Petitioners argue that the premiums received by Syzygy were payments for insurance and, therefore: (1) these premiums are excluded from Syzygy's income under section 831(b) and (2) the individual petitioners are entitled to deduct the pre

But personal, living, and family expenses are not deductible. Sec. 262. For an expenditure to be an ordinary and necessary business expense, generally the taxpayermust show a bona fide business purpose for the expenditure and a proximate relationship between the expenditure and the business ofthe taxpayer. S_e_e Challenge Mfg. Co. v. Comm

No deductions under section 162 shall be allowed for "listed property", as defined in section 280F(d)(4), "unless the taxpayer substantiates [them] by adequate records or by sufficient evidence corroborating the taxpayer's own - 13 - [*13] statement".

At trial the IRS asserted the following: (1) each taxpayer did not have a tax home and thus could not deduct the claimed expenses as "away from home" unreimbursed employee business traveling expenses under section 162;" (2) each ¹°For over two decades the Commissioner has issued revenue procedures which specify the Federal travel regulations M&IE rate as the amount that a taxpayermay deduct in lieu ofsubstantiating the actual cost ofmeals and incidental expenses paid or incurred while traveling

The Commissioner argues that BAI deducted this amount as a section 162 business expense on its original 2003 return and then, after the Commissioner allowed that deduction during the 2° We note that the Commissioner could have argued this item with the other items falling under the wrong-year-to-expense issue.

895, 902-03 (1971) (cost oftraveling to view and potentially purchase equipment for future business not deductible under section 162 or section 212).

At trial the IRS asserted the following: (1) each taxpayer did not have a tax home and thus could not deduct the claimed expenses as "away from home" unreimbursed employee business traveling expenses under section 162;" (2) each ¹°For over two decades the Commissioner has issued revenue procedures which specify the Federal travel regulations M&IE rate as the amount that a taxpayermay deduct in lieu ofsubstantiating the actual cost ofmeals and incidental expenses paid or incurred while traveling

A taxpayer may not fully deduct expenses regarding an activity under section 162 or 212 ifthe activity is not engaged in for profit.

No deductions under section 162 shall be allowed for "listed property", as defined in section 280F(d)(4), "unless the taxpayer substantiates [them] by adequate records or by sufficient evidence corroborating the taxpayer's own - 13 - [*13] statement".

Many ofpetitioners' K&W invoices were captioned "Personal", and petitioners offered little explanation for the business purpose oftheir various legal expenses. The records they provided show significant overlap between business and personal expenses. Petitioners incurred $13,328 in K&W legal fees for an "IRS and FOIA project", but they pr

Accordingly, petitioner is not entitled to a deduction under section 162 for travel, meals, and lodging expenses paid or incurred while away from home during the years in issue.

Many ofpetitioners' K&W invoices were captioned "Personal", and petitioners offered little explanation for the business purpose oftheir various legal expenses. The records they provided show significant overlap between business and personal expenses. Petitioners incurred $13,328 in K&W legal fees for an "IRS and FOIA project", but they pr

Section 183(c) defines an "activity not engaged in for profit" as "any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." The Court ofAppeals for the Fifth Circuit, to which appeal in these cases would generally lie, has held that for a deduction to be allowed under section 162 or 212(1) or (2), a taxpayer must establish that he engaged in the activity with the primary purpose and intent - 19

Because any employee is engaged in the business ofearning her pay, expenses related to a taxpayer's employment and not reimbursable by the employer have long been deductible under section 162 and its predecessors.

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

Schedule C Deductions A taxpayer may not fully deduct expenses regarding an activity under section 162 or 212 ifthe activity is not engaged in for profit.

Deductions Section 162 allows a deduction for ordinary and necessary expenses paid or incurred in connection with a trade or business.

Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Sec. 162(a); sec. 1.162-1(a), Income Tax Regs. A business expense is "ordinary" ifit is "normal, usual, or customary" in the taxpayer's trade or business. See Deputy v. du Pont, 308 U.S. 488, 495 (1

the trade or business ofrendering services for pay); Mitchell v. United States, 408 F.2d 435, 439 (Ct. Cl. 1969) (finding that a taxpayer's activity ofbeing a corporate official ofhis own corporation was his primary trade or business for purposes ofsec. 162 despite his participation and compensation received for acting as an officer and director ofother corporations); see also sec. 3121(d)(1) (providing that for employment tax purposes any officer ofa corporation is an employee); c[ DePinto v.

A trade or business expense is ordinary for the purposes ofsection 162 ifit is normal or customary within a particular trade, business, or industry and is necessary ifit is appropriate or helpful for the development ofthe business.

ayments a business makes to an FSC in exchange for nothing, even though we wouldn't do that for most types ofcorporations. It also acknowledges that the Code lets businesses deduct these payments even though they aren't "ordinary and necessary." See sec. 162. It recognizes that we treat these payments as income to the FSC, and it finds that the FSC here paid tax on this income.¹° It also realizes that the funds the FSC paid out were dividends. Up to this point the majority's approach isn't much

Section 162 permits taxpayers to deduct all ordinary and necessary partnership business expenses paid or incurred in connection with a trade or business. Sections 195(b) and 709(b) permit taxpayers to elect to amortize certain startup and partnership organizational expenses. But these sections do not include - 23 - [*23] abusive tax shelter expend

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

For the purpose ofsection 162, home is the vicinity ofa taxpayer's principal place ofemployment and not where his or her personal residence is located.

Petitioners included the wage payments they received from Palisades as a part of Palisades' expenses in its section 162 deductions.

Generally, a taxpayer must establish that deductions claimed under section 162 are ordinary and necessary business expenses, and the taxpayermust maintain records to substantiate the deductions claimed.

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

A trade or business expense is ordinary for the purposes ofsection 162 ifit is normal or customary within a particular trade, business, or industry and is necessary ifit is appropriate or helpful for the development ofthe business.

-6- for deductibility under section 162 is a question offact.

d cases C, a corporation, operates a medical marijuana dispensary in California. Other Ps were individual shareholders ofS, an S corporation that was organized to handle daily operations for C including paying employee wages and salaries. C deducted I.R.C. sec. 162 business expenses and later adjusted COGS to include indirect expenses per I.R.C. sec. 263A. R determined that both C's and S's sole trade or business was trafficking in a controlled substance and that I.R.C. sec. 280E precluded C's a

d cases C, a corporation, operates a medical marijuana dispensary in California. Other Ps were individual shareholders ofS, an S corporation that was organized to handle daily operations for C including paying employee wages and salaries. C deducted I.R.C. sec. 162 business expenses and later adjusted COGS to include indirect expenses per I.R.C. sec. 263A. R determined that both C's and S's sole trade or business was trafficking in a controlled substance and that I.R.C. sec. 280E precluded C's a

d cases C, a corporation, operates a medical marijuana dispensary in California. Other Ps were individual shareholders ofS, an S corporation that was organized to handle daily operations for C including paying employee wages and salaries. C deducted I.R.C. sec. 162 business expenses and later adjusted COGS to include indirect expenses per I.R.C. sec. 263A. R determined that both C's and S's sole trade or business was trafficking in a controlled substance and that I.R.C. sec. 280E precluded C's a

The issues for decision are: (1) whether petitioner may immediately deduct expenditures under section 162 totaling $199,031 and $47,630 for 2010 and 2011, respectively, and (2) whether petitioner is liable for an accuracy-relatedpenalty under section 6662(a) for 2010.

business income. Brown v. Commissioner, T.C. Memo. 1984-120. Petitioner bears the burden ofproving to what extent the gift items contributed to his income. See Sutter v. Commissioner, 21 T.C. 170, 173-174 (1953). Business gift deductions pursuant to sec. 162 are restricted to $25 per donee per taxable year and require adequate substantiation under sec. 274(d). Sec. 274(b)(1). All ofthe expenses petitioner labeled "gifts" are over $25 and have not been adequately substantiated under sec. 274(d).

In the alternative, respondent determined that the expenses in dispute do not constitute ordinary and necessary business expenses within the meaning ofsection 162.7 6Petitioner's grandson was stationed in Okinawa at the time ofthis trip.

Whether an expenditure satisfies the requirements for deductibility under section 162 is generally a question offact.

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

Deductions Section 162 allows a deduction for ordinary and necessary expenses paid or incurred in connection with a trade or business.

d cases C, a corporation, operates a medical marijuana dispensary in California. Other Ps were individual shareholders ofS, an S corporation that was organized to handle daily operations for C including paying employee wages and salaries. C deducted I.R.C. sec. 162 business expenses and later adjusted COGS to include indirect expenses per I.R.C. sec. 263A. R determined that both C's and S's sole trade or business was trafficking in a controlled substance and that I.R.C. sec. 280E precluded C's a

ayments a business makes to an FSC in exchange for nothing, even though we wouldn't do that for most types ofcorporations. It also acknowledges that the Code lets businesses deduct these payments even though they aren't "ordinary and necessary." See sec. 162. It recognizes that we treat these payments as income to the FSC, and it finds that the FSC here paid tax on this income.¹° It also realizes that the funds the FSC paid out were dividends. Up to this point the majority's approach isn't much

As used in section 162, an "ordinary" expense is defined as one which is "normal, usual, or customary" in the taxpayer's trade or business, see Deputy v.

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

Section 162 Deductions Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Sec. 162(a); sec. 1.162-1(a), Income Tax Regs. Generally, the performance ofservices as an employee constitutes a trade or business. Primuth v. Commissioner, 54 T.C. 374, 377

Section 280E, however, provides that no deduction is allowed for an amount paid or incurred in carrying on a business ifthe business consists of trafficking in controlled substances.

Section 183(c) defines an activity not engaged in for profit as "any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." For expenses to be deductible under section 162, Trade or Business Expenses, or section 212, Expenses for Production ofIncome, and not subject to the limitations ofsection 183, taxpayers must show that they engaged in the activity with the primary objective ofmaking a profit

Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Sec. - 21 - [*21] 162(a); sec. 1.162-1(a), Income Tax Regs. An expense is "ordinary" ifit is "normal, usual, or customary" in the taxpayer's trade or business or arises from a transaction "ofcommon

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

-8- for deductibility under section 162 generally is a question offact.

d cases C, a corporation, operates a medical marijuana dispensary in California. Other Ps were individual shareholders ofS, an S corporation that was organized to handle daily operations for C including paying employee wages and salaries. C deducted I.R.C. sec. 162 business expenses and later adjusted COGS to include indirect expenses per I.R.C. sec. 263A. R determined that both C's and S's sole trade or business was trafficking in a controlled substance and that I.R.C. sec. 280E precluded C's a

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

d cases C, a corporation, operates a medical marijuana dispensary in California. Other Ps were individual shareholders ofS, an S corporation that was organized to handle daily operations for C including paying employee wages and salaries. C deducted I.R.C. sec. 162 business expenses and later adjusted COGS to include indirect expenses per I.R.C. sec. 263A. R determined that both C's and S's sole trade or business was trafficking in a controlled substance and that I.R.C. sec. 280E precluded C's a

Deductions Section 162 allows a deduction for ordinary and necessary expenses paid or incurred in connection with a trade or business.

Respondent asserts that petitioner's expenses are not deductible under section 162 for the following reasons: (1) petitioner did not prove that they are ordinary and necessary business expenses and (2) petitioner's program ofstudy (NYU LL.M.

Miscellaneous deductions under section 162 are subject to the 2% floor in section 67(a).

Deductions Section 162 allows a deduction for ordinary and necessary expenses paid or incurred in connection with a trade or business.

Section 162 permits taxpayers to deduct all ordinary and necessary partnership business expenses paid or incurred in connection with a trade or business. Sections 195(b) and 709(b) permit taxpayers to elect to amortize certain startup and partnership organizational expenses. But these sections do not include - 23 - [*23] abusive tax shelter expend

Section 183(c) defines an "activity not engaged in for profit" as "any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." The Court ofAppeals for the Fifth Circuit, to which appeal in these cases would generally lie, has held that for a deduction to be allowed under section 162 or 212(1) or (2), a taxpayer must establish that he engaged in the activity with the primary purpose and intent - 19

III. Conclusion For the reasons stated above, the Court sustains respondent's determination that petitioners may not deduct the claimed expenses for 2013.8 Because 8Since we conclude that petitioners may not deduct the reported expenses under either sec. 162 or sec. 212, we need not and do not address respondent's assertion that the mileage and travel expenses are also nondeductible, personal expenses. -16- petitioners are not entitled to deduct any ofthese expenses, the Salem house remodeling a

Section 162 permits taxpayers to deduct all ordinary and necessary business expenses paid or incurred during the taxable year. A taxpayer claiming a deduction on a Federal income tax return must demonstrate that the deduction is allowable pursuant to a statutory provision and must further substantiate that the expense to which the deduction relates

Section 183(c) defines an activity not engaged in for profit as "any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." For expenses to be deductible under section 162, Trade or Business Expenses, or section 212, Expenses for Production ofIncome, and not subject to the limitations ofsection 183, taxpayers must show that they engaged in the activity with the primary objective ofmaking a profit

Deductions Section 162 allows a deduction for ordinary and necessary expenses paid or incurred in connection with a trade or business.

Section 162 permits taxpayers to deduct all ordinary and necessary business expenses paid or incurred during the taxable year. A taxpayer claiming a deduction on a Federal income tax return must demonstrate that the deduction is allowable pursuant to a statutory provision and must further substantiate that the expense to which the deduction relates

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

It disallowed deductions for the balance ofthe "management fees" and for the totality ofthe "factoring fees." The claimed deductions were disallowed on various alternative grounds, including failure to satisfy the requirements ofsection 162, lack ofeconomic substance, and lack of arm's-length pricing under section 482.

Trade or Business Deductions Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Management fees are deductible under section 162 ifthey are ordinary, necessary and reasonable payments made for services rendered.

The determination ofwhether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

earance for petitioners. In an order dated January 4, 2014, we concluded that petitioners' former counsel had an imputed conflict ofinterest, and we reopened the record for petitioners to, inter alia, present evidence as to the reasonableness under sec. 162 ofthe management fee and the arm's-length value ofthe management services that Albion purportedlyprovided to the operating companies. - 9 - [*9] Stevens transaction for a fee of$50,000. The contract contained the following disclaimer: The par

Section 162 Expenses Generally Deductions are a matter oflegislative grace, and a taxpayer is required to maintain records sufficient to substantiate expenses underlying deductions claimed on his or her return. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.; see Næ Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Section 162(a) generally all

Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred by the taxpayer in carrying on a trade or business; but personal, living, or family expenses are not deductible. Secs. 162(a), 262(a). A trade or business expense is ordinary ifit is normal or customary within a particulartrade, business, or industry, and it

Section 162--one ofthe most -14- commonly cited Code sections--combines the two by allowing deductions for ordinary and necessary expenses "paid or incurred" in a trade or business. Sec. 162(a). The Supreme Court itselfhas said "incurred" in this context refers to the accrual method. United States v. Hughes Props., Inc., 476 U.S. 593, 599 (1986) (

Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred by the taxpayer in carrying on a trade or business; but personal, living, or family expenses are not deductible. Secs. 162(a), 262(a). A trade or business expense is ordinary ifit is normal or customary within a particulartrade, business, or industry, and it

Big Dog Farms A taxpayer may not fully deduct expenses for an activity under section 162 ifthe activity is not engaged in for profit.

Schedule C Deductions Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

To prove deductions under section 162, a taxpayermust keep sufficient records to substantiate them.

Car and Truck Expenses Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.

162; Levenson & Klein, Inc. v. Commissioner, 67 T.C. 694, 719-721 (1977); sec. 1.162-1, Income Tax Regs. In substantiating his reported expenses, petitionerprovided credit card statements and canceled checks. Several ofthe checks are inadequate because they are not related to costs incurred for legal and professional services. For example, pet

Section 162--one ofthe most -14- commonly cited Code sections--combines the two by allowing deductions for ordinary and necessary expenses "paid or incurred" in a trade or business. Sec. 162(a). The Supreme Court itselfhas said "incurred" in this context refers to the accrual method. United States v. Hughes Props., Inc., 476 U.S. 593, 599 (1986) (

age relating to apartment 3B. The portion ofthe loan repayments attributable to principal is not deductible. See Porter v. Commissioner, T.C. Memo 2015-122. However, the portion relating to interest is deductible as a trade or business expense under section 162. Sec. 162(a); Robinson v. Commissioner, 119 T.C. 44, 48 (2002); see sec. 163(a) (allowing a deduction for "all interest paid or accrued within the taxable year on indebtedness", with certain exceptions). Accordingly, we find that petition

The determination ofwhether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

The determination ofwhether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

162; Levenson & Klein, Inc. v. Commissioner, 67 T.C. 694, 719-721 (1977); sec. 1.162-1, Income Tax Regs. However, section 280A(a) disallows a deduction for business expenses with respect to the use ofa dwelling unit used by the taxpayer during the taxable year as a residence, with certain exceptions. Section 280A(c)(1)(A) provides an exception

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

Since section 162 does not impose a "but for" test upon the deductibility of expenses, petitioners assert, the deduction here should be allowed absent a - 10 - [*10] showing that the payments were inherently unreasonable in amount, against public policy, or otherwise barred. Petitioners maintain that payment ofthe payroll taxes benefited Quantum Inc. be

To prove deductions under section 162, a taxpayermust keep sufficient records to substantiate them.

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

at specifically reported any income or expense attributable to the real estate business.8 Mr. Larkin first transferred funds to the real estate business during 3Respondent concedes that the real estate business was a "business" within the meaning ofsec. 162. Petitioners occasionally suggest that both ofthem operated the business, but in the main refer to it as Mr. Larkin's business, and we so find. Petitioners are also equivocal on the product(s) and/or service(s) that the real estate business p

Taxpayers may deduct unreimbursed employee expenses paid or incurred in carrying on a trade or business under section 162 as ordinary and necessary business expenses.

Taxpayers must maintain records sufficient to substantiate the section 162 deductions they -13- [*13] claim.

Section 162 Deductions A taxpayer may deduct all ordinary and necessary business expenses paid or incurred during the taxable year in carrying on a trade or business. Sec. 162(a); sec. 1.162-1(a), Income Tax Regs. Generally, the performance ofservices as an employee constitutes a trade or business. Primuth v. Commissioner, 54 T.C. 374, 377 (1970).

On briefpetitioners and respondent treat the amounts as disputed claims for deductible business expenses under section 162, and we consider them as such.

Respondent acknowledges, however, that section 162 in appropriate circumstances may provide a basis for a corporation's claiming deductions ofthis sort.

Qualifying expenses under section 162 include expenses paid or incurred as an employee.

Section 162 Petitioners argue, in the alternative, that the legal fees are deductible as ordinary and necessary business expenses under section 162. Expenses are deductible under section 162 ifthe taxpayer establishes that they were ordinary, necessary, and paid or incurred during the tax year and were directly connected with, or proximately result

Section 162 Expenses Section 162(a) generally allows deductions for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. In general, no deduction is permitted for personal, living, or family expenses. Sec. 262(a). The taxpayerbears the burden ofproving that expenses were ofa business nat

162; Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987). Thus, petitioner may offset investment income with losses incurred in sales to nonmembers only ifits nonmember sales were motivated by an intent to -5- [*5] profit. See Portland GolfClub v. Commissioner, 497 U.S. at 163-164.3 To prove its intent to profit, petitioner must establish tha

23, 35 (1987); see also sec.

ubject to the limitations set forth supra. See secs. 56(b)(1)(A)(i), 67(a) and (b), 68, 211, 212(1). 5We further note that it would appear that Mr. Dulik was not "carrying on" a trade or business when the legal expenditures were made, as required by sec. 162. Carrying on a trade or business requires more than preparatory work such as initial research or solicitation ofpotential customers; it requires that the business have actually commenced. Ordinarily, expenses paid after a decision has been m

Section - 6 - [*6] 183(c) defines an "activity not engaged in for profit" as "any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." "An activity is engaged in for profit ifthe taxpayerhas an actual, honest profit objective, even ifit is unreasonable or unrealistic." Keating v.

- 7 - [*7] meaning ofsection 162, an expense needs to be "appropriate and helpful" to the taxpayer's business.

at specifically reported any income or expense attributable to the real estate business.8 Mr. Larkin first transferred funds to the real estate business during 3Respondent concedes that the real estate business was a "business" within the meaning ofsec. 162. Petitioners occasionally suggest that both ofthem operated the business, but in the main refer to it as Mr. Larkin's business, and we so find. Petitioners are also equivocal on the product(s) and/or service(s) that the real estate business p

162; Commissioner v. Lincoln Sav. & Loan Ass'n, 403 U.S. 345, 352-353 (1971); Lychuk v. Commissioner, 116 T.C. 374, 386 (2001). Taxpayers may not, however, deduct personal, living, or family expenses. Sec. 262. Section 280A strictly limits a taxpayer's deduction for business expenses arising from the use ofa home office. A taxpayermay deduct h

Respondent acknowledges, however, that section 162 in appropriate circumstances may provide a basis for a corporation's claiming deductions ofthis sort.

Section 274(a)(1)(A) disallows a deduction for certain meal and entertainment expenses otherwise deductible under section 162 unless the expenses are associated with the active conduct ofthe taxpayer's trade or business.

To decide whether a taxpayer is carrying on a trade or business so that his expenses are deductible under section 162, the Court examines whether the taxpayer's primary purpose and intention in engaging in the activity is to make a profit.

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

334 (1981); see also Console v.

[*5] The issues for consideration are: (1) whether petitioner is entitled to related-party bad debt deductions under section 166 for tax years 2004 and 2006- 13; (2) whether alternativelypetitioner is entitled to business expense deductions under section 162 for the tax years at issue; (3) whether alternatively petitioner is entitled to recoup taxes paid for closed tax years on amounts it advanced to related parties; (4) whether alternatively petitioner is entitled to recoup taxes paid for clos

Any deductions to which petitioner would otherwise be entitled under either section 162 or section 212 will be disallowed ifhe used the Indiana property as a residence during the tax years in issue within the meaning ofsection 280A(d)(1).

[*5] The issues for consideration are: (1) whether petitioner is entitled to related-party bad debt deductions under section 166 for tax years 2004 and 2006- 13; (2) whether alternativelypetitioner is entitled to business expense deductions under section 162 for the tax years at issue; (3) whether alternatively petitioner is entitled to recoup taxes paid for closed tax years on amounts it advanced to related parties; (4) whether alternatively petitioner is entitled to recoup taxes paid for clos

A taxpayer seeking to deduct trade or business expenses under section 162 must establish that the underlying activity was engaged in with an actual and honest profit objective.

A trade or business expense is ordinary for purposes ofsection 162 ifit is normal or customarywithin a particulartrade, business, or industry and is necessary ifit is appropriate and helpful for the development ofthe business.

An activity is "not engaged in for profit" ifit is an activity other than one with respect to which deductions are allowable for the taxable year under section 162 or section 212(1) or (2).

Petitioner's Unreimbursed Employee Business Expenses Section 162 allows a deduction for "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

An activity is "not engaged in for profit" ifit is an activity other than one with respect to which deductions are allowable for the taxable year under section 162 or section 212(1) or (2).

Business Expense Deductions Section 162 allows deductions for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.

CRI-Leslie claimed deductions under section 162 on its 2008 partnership return for expenses related to the operation ofthe hotel.

The determination ofwhether an - 10 - expenditure satisfied the requirements for deductibility under section 162 is a question offact.

s not entitled to claim the foreign earned income exclusion for 2009, 2010, or 2011. III. Travel and Other Expenses Generally, a taxpayerwho is an employee may deduct unreimbursed employee expenses as an ordinary and necessary business expense under section 162. Lucas v. Commissioner, 79 T.C. 1, 6 (1982). In addition, section 6001 requires a taxpayerto maintain sufficient records to allow the determination ofthe taxpayer's correct tax liability. Regarding travel to and from a taxpayer's place of

Unreimbursed Employee Expenses Section 262 provides that a taxpayer generally cannot deduct personal, living, or family expenses.

Ifan expense can be considered either a gambling loss under section 165(d) or a business expense under section 162, section 165(d) as the more specific statute controls.

The phrase "activity not engaged in for profit" means any activity other than one with respect to which deductions are allowed for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212.

In any event, consistent with our determination that petitioner had no earned income within the meaning of section 32(c)(2) in taxable year 2008, it follows that he lacked the "qualifying income" required to be eligible for a recovery rebate credit for taxable year 2008.

The determination ofwhether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

which it defines as "the gross income derived by an individual from any trade or business carried on by such individual." Sec. 1402(a) and (b). Section 1402(c) tells us that the phrase "trade or business" means the same in section 1402 as it does in section 162. Section 162, however, is a dead end. Nowhere in that section--or anywhere else--does the Code define "trade or business."5 The Supreme Court long ago forged a plug for this gap and defined a trade or business as an activity engaged in fo

Petitioners' claimed deduction under section 162 must therefore be disallowed in its entirety.

2014-235, at *12-*13 (discussing section 162(1) and Rev.

The determination ofwhether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

A deduction under section 162 generally is not allowable to an employee to the extent that the employee is entitled to (but does not claim) reimbursement of the expense.

allowed deductions for ordinary and necessary expenses paid or incurred in carrying on a trade or business during the tax year. Sec. 162(a). The performance ofservices as an employee constitutes the carrying on ofa trade or business for purposes ofsection 162. Thus, taxpayers may deduct expenses that are ordinary and necessary for their employment, provided the taxpayerwas an employee and could not have been (and was not) reimbursed by his/her employer for such expenses. Rehman v. Commissioner,

Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred by the taxpayer in carrying on a trade or business, including expenses paid or incurred as an employee. Lucas v. Commissioner, 79 T.C. 1, 6 (1982). However, taxpayers must maintain adequate books and records sufficient to establish the amounts ofany expenses

Other Deductions Petitioner also asserts questionable legal theories about deductions ofcosts ofgoods sold under section 162, inventory accounting, and capitalization ofitems under section 263A, but he has not established that he incurred costs attributable to goods sold during 2009.

ecember 8, 2016. Ps were husband and wife. H was a sole proprietor farmer. H purchased certain farm inputs in 2010 intending to use them to cultivate crops the following year. H, a cash-method taxpayer, deducted his expenditures on the inputs under I.R.C. sec. 162 for that same tax year. H died in March 2011 not having used any ofthe purchased farm inputs. They were subsequentlytransferred to W, who began her own farming business as sole proprietor upon H's death. W used all the farm inputs in 2

To decide whether a taxpayer is carrying on a trade or business so that his expenses are deductible under section 162, the Court examines whether - 20 - [*20] the taxpayer's primarypurpose and intention in engaging in the activity is to make a profit.

Expenditures made by a taxpayer in obtaining or furthering his or her education are considered personal expenses and are not deductible unless they qualify as a deduction under section 162 and the accompanying regulations.

generate original issue discount (OID) income under section 1272. According to respondent, petitioner is - 97 - not entitled to depreciation deductions under section 168, interest deductions under section 467, or transaction cost deductions under section 162. In the alternative, respondent argues that the test transactions lack economic substance because they were driven by tax considerations and the desire to defer taxation ofa $1.6 billion gain, not by a legitimate business purpose. According

- 5 - [*5] OPINION Section 162 allows a deduction for ordinary and necessary expenses paid or incurred in connection with a trade or business.

the donor maintains as a record ofsuch contribution a bank record or written communication from the donee showing the name ofthe donee organization, the date ofthe contribution, and the amount ofthe contribution." Employee Business Expenses Overview Section 162 allows a taxpayerto deduct all "ordinary and necessary" expenses paid or incurred by the taxpayer in carrying on a trade or business, including expenses paid or incurred as an employee.

The determination ofwhether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

Because any employee is engaged in the business ofearning his pay, expenses related to a taxpayer's employment and not reimbursed by the employer have long been deductible under section 162 and its predecessors.

ting in debt or distressed debt. Moreover, even ifNiemann intended to get into the business ofmaking and holding loans in the future, his activity was at most sporadic in 2010, and a business must have already begun for us to allow a deduction under section 162. See McManus v. Commissioner, T.C. Memo. 1987-457, aff'd without published opinion, 865 F.2d 255 (4th Cir. 1988); see also Wolfgram v. Commissioner, T.C. Memo. 2010-69 (intent to operate property as a bed and breakfast before operation be

The determination ofwhether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

1927 (2006) because it was not an ordinary and necessary business expense under section 162, the Court left open the question ofwhether he could deduct this payment under a different theory.

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

ent Anderson reduced Crossroads Wellness' cost ofgoods sold from $28,035 to $13,017. Cost ofgoods sold is subtracted from gross receipts in computing gross income. Sec. 1.61-3(a), Income Tax Regs. Cost ofgoods sold is not an expense deduction under section 162. See Max Sobel Wholesale Liquors v. Commissioner, 69 T.C. 477 (1977), aM, 630 F.2d 670 (9th Cir. 1980); sec. 1.162-1(a), Income Tax Regs. A taxpayer must retain records sufficient to substantiate the claimed cost of goods sold. Sec. 6001;

Other Deductions Petitioner also asserts questionable legal theories about deductions ofcosts ofgoods sold under section 162, inventory accounting, and capitalization ofitems under section 263A, but he has not established that he incurred costs attributable to goods sold during 2009.

y argues that he is not subject to self-employmenttax on the $2 million payment because he was not engaged in a trade or business as a tax shelter accommodating party. The term "trade or business" has the same meaning under section 1402(a) as under section 162. Sec. 1402(c); see Bot v. Commissioner, 118 T.C. 138, 146 (2002), aff'd, 353 F.3d 595 (8th Cir. 2003). In Commissioner v. Groetzinger, 480 U.S. 23,.35 (1987), the Supreme Court determined that to be engaged in a trade or businesssunder sec

Section 183(c) provides: "For purposes ofthis section, the term 'activity not engaged in for profit' means any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." Section 1.183-2(b), Income Tax Regs., sets forth a nonexclusive list ofnine factors to be considered when ascertaining a taxpayer's profit intent.

To be "necessary" within the meaning ofsection 162, an expense needs to be "appropriate and helpful" to the taxpayer's business.

deductions for employee business expenses and miscellaneous expenses outlined above. Respondent determined that petitioners failed to establish that the expenses were paid in 2010 or that the expenses were ordinary and necessary within the meaning ofsection 162. VI. Closing the Record At the close ofthe trial the Court left the record open for 60 days to permit the parties to exchange and possibly stipulate additional records that might allow 3(...continued) 50 cents per mile for 2010 is set for

Section 183(a) limits section 162 trade or business expense deductions a taxpayer may claim for expenses attributable to an activity not engaged in for profit.

Section 162 generally allows a taxpayerto deduct ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. Section 280E, however, is an exception to the general rule ofsection 162. It provides that [n]o deduction * * * shall be allowed for any amount paid or incurred during the taxable year in ca

Schedule A Unreimbursed Employee Expenses We have held that "an individual may be in the trade or business ofbeing an employee and that ordinary and necessary expenses incurred in that trade or business are deductible under section 162."23 However, a deduction is not allowed ifthe employee is entitled to reimbursement from his or her employerbut does not 2°39 F.2d 540, 543-544 (2d Cir.

Schedule A Unreimbursed Employee Expenses We have held that "an individual may be in the trade or business ofbeing an employee and that ordinary and necessary expenses incurred in that trade or business are deductible under section 162."23 However, a deduction is not allowed ifthe employee is entitled to reimbursement from his or her employerbut does not 2°39 F.2d 540, 543-544 (2d Cir.

Where an expense exhibits both personal and business characteristics, the "test[] requires a weighing and balancing ofall the facts * * * bearing in mind the precedence of section 262, which denies deductions for personal expenses, over section 162, which allows deductions for business expenses." Sharon v.

expense is necessary ifit is appropriate and helpful for the development ofthe business.¹6 Implicit in the foregoing definitions is the concept that a taxpayermust in fact be "carrying on" a trade or business for expenditures to be deductible under section 162. Mr. Espaillat and Ms. Lizardo claimed a deduction of$359,000 as "other expenses" on their 2008 return. Although they introduced business ¹'See Rule 142(a); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). ¹5Deputy v. du Pont,

Section 183(c) provides: "For purposes ofthis section, the term 'activity not engaged in for profit' means any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." Section 1.183-2(b), Income Tax Regs., sets forth a nonexclusive list ofnine factors to be considered when ascertaining a taxpayer's profit intent.

Additionally, for a deduction under section 162, the expenditure must be "directly connected with or pertaining to the taxpayer's trade or business".

He adds that ordinary and necessary legal expenses are generally deductible under section 162 when they arise from, or are proximately related to, a business activity.

- 24 - [*24] Section 162(a) provides that deductions are allowable for expenses paid or incurred in carrying on a trade or business.

Accordingly, section 83(h) allows a deduction under section 162 to the person for whom such services were performed in an amount equal to the amount included under section 83(a) in the gross income ofthe person who performed such services.

Schedule C Business Expenses Section 162 allows a taxpayerto deduct all ordinary and necessary expenses incurred in carrying on a trade or business.

Ordinary and Necessary Expenses Section 162 allows a taxpayerto deduct "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

Section 162 allows a deduction for all ordinary and necessary expenses paid or incurred during the tax year in carrying on any trade or business. Section 274(d) precludes a deduction for specified expenses unless a taxpayer substantiates by adequate records or by sufficient evidence corroborating the taxpayer's own statement the following five elem

Unreimbursed Employee Business Expenses Section 162 permits a taxpayerto deduct ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Whether an expenditure satisfies the requirements for deductibility under section 162 generally is a question offact.

A trade or business expense is ordinary for purposes ofsection 162 ifit is normal or customary within a particular trade, business, or industry and is necessary ifit is appropriate and helpful for the development ofthe business.

- 24 - [*24] Section 162(a) provides that deductions are allowable for expenses paid or incurred in carrying on a trade or business.

Additionally, for a deduction under section 162, the expenditure must be "directly connected with or pertaining to the taxpayer's trade or business".

e. Deductions are subtracted from the Schedule C business gross income in order to determine its net profit or net loss. Accordingly, returns and allowances and cost ofgoods sold are not treated as deductions and are not subject to the limitations ofsection 162. Metra Chem Corp. v. Commissioner, 88 T.C. 654, 661 (1987); Nunn v. Commissioner, T.C. Memo. 2002-250. Nevertheless, taxpayers must retain sufficient records to substantiate amounts claimed as returns and allowances or cost ofgoods sold.

For such items to be deductible, petitioner must prove by a preponderance ofthe evidence that they are ordinary and necessary to her business activities under section 162 and not nondeductible personal expenses under section 262.

e. Deductions are subtracted from the Schedule C business gross income in order to determine its net profit or net loss. Accordingly, returns and allowances and cost ofgoods sold are not treated as deductions and are not subject to the limitations ofsection 162. Metra Chem Corp. v. Commissioner, 88 T.C. 654, 661 (1987); Nunn v. Commissioner, T.C. Memo. 2002-250. Nevertheless, taxpayers must retain sufficient records to substantiate amounts claimed as returns and allowances or cost ofgoods sold.

acknowledges that determining whether petitioner's reimbursements to clients were ordinary and necessary business expenses under section 162 was outside the scope ofhis opinion letter.

Additionally, for a deduction under section 162, the expenditure must be "directly connected with or pertaining to the taxpayer's trade or business".

oyee business.expenses consisted ofvehicle expenses; parking fees, tolls, and transportation; and other unidentified expenses. _ 9 _ Generally, a taxpayermay deduct tmreimbursed employee expenses as an ordinary and necessary business expense under section 162. Lucas v. Commissioner, 79 T.C. 1, 6 (1982). A. Vehicle Expenses and Parking Fees, Tolls, and Transportation Petitioner claimed unreimbursed employee business expense deductions of $4,385 and $6,467 for vehicle expenses and parking fees, to

On the other hand, section 162 allows as a deduction "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

- 5 - [*5] In the notice ofdeficiencyrespondent determined that petitioner did not operate Aero-tronics as a trade or business within the meaning ofsection 162 for 2010 and 2011.

The phrase "activity not engaged in for profit" means any activity other than one with respect to which deductions are allowed for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212.

On the other hand, section 162 allows as a deduction "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

, aff'g T.C. Memo. 1995-559; Deamer v. Commissioner, 752 F.2d 337, 339 (8th Cir. 1985), aff'g T.C. Memo. 1984-63; Johnson v. Commissioner, 115 T.C. 210, 221 (2000). Such a taxpayer is not entitled to business deductions for traveling expenses under section 162. Kroll v. Commissioner, 49 T.C. 557, 562 (1968). The burden ofproofis on the taxpayer ifhe disagrees with the Commissioner, Welch v. Helvering, 290 U.S. 111 (1933), and that is a high hurdle for a tax turtle to clear. But was Jacobs a tax

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

OPINION Section 162 allows as a deduction "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

Section 183(c) provides: "For purposes ofthis section, the term 'activity not engaged in for profit' means any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." Section 1.183-2(b), Income Tax Regs., sets forth a nonexclusive list ofnine factors to be considered when ascertaining a taxpayer's profit intent.

Section 162 Deductions are a matter oflegislative grace and are allowed only as specifically provided by statute. INDOPCO, Inc. v. Commissioner, 503 U.S. at 84; New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Taxpayers are required to substantiate each claimed deduction by maintaining records sufficient to establish the amount ofthe de

se is one that is "appropriate and helpful" to the taxpayer's business. Welch v. Helvering, 290 U.S. at 113. To the extentthat an expense is unreasonable, it is not necessary. In such a case, only the portion which was reasonable is deductible under section 162. United States v. Haskel Eng'g & Supply Co., 380 F.2d 786, 788-789 (9th Cir. 1967). The taxpayerbears the burden ofproving that claimed expenses are ordinary and necessary and also bears the burden ofsubstantiating claimed deductions. Sec

Whether an expense is ordinary is determined by time, place, and circumstance. Welch v. Helvering, 290 U.S. at 113-114. Where a taxpayerreports a business expense but cannot fully substantiate it, the Court generally may approximate the allowable amount. Cohan v. Commissioner, 39 F.2d 540 at 543-544. However, we may do so only when the ta

e disallowed professional fees were incurred in connection with some other, legitimate, trans- action. Petitioner has thus failed to carry his burden ofproving that any portion of these fees constituted deductible business expenses ofWest Side under section 162. See Agro Sci. Co. v. Commissioner, 934 F.2d 573, 576 (5th Cir. 1991), T.C. Memo. 1989-687; Simon v. Commissioner, 830 F.2d 499, 500-501 (3d Cir. 1987), § T.C. Memo. 1986-156; Cullifer v. Commissioner, T.C. Memo. 2014- 208, at *45. West S

The cost ofwork clothing may be deducted under section 162 ifthe taxpayer can establish that: (1) the clothing was required or essential in the taxpayer's employment; (2) the clothing was not suitable for general or personal wear; and (3) the clothing was not so worn.

Whether an expenditure satisfies the requirements for deductibility under section 162 is generally a question offact.

se is one that is "appropriate and helpful" to the taxpayer's business. Welch v. Helvering, 290 U.S. at 113. To the extentthat an expense is unreasonable, it is not necessary. In such a case, only the portion which was reasonable is deductible under section 162. United States v. Haskel Eng'g & Supply Co., 380 F.2d 786, 788-789 (9th Cir. 1967). The taxpayerbears the burden ofproving that claimed expenses are ordinary and necessary and also bears the burden ofsubstantiating claimed deductions. Sec

A trade or business expense is ordinary for purposes ofsection 162 ifit is normal or customary within a particular trade, business, or industry and is necessary ifit is appropriate and helpful for the development ofthe business.

not all ofwhich are entirely legible, appear to be from 2007 and 2008. No comparable evidence--other than Exhibit 35-P, an October 6, 2006, canceled check for $792, an amount which respondent conceded during the examination and shall be allowed as a sec. 162 deduction-- was submitted for 2006, and none ofthe Quickbooks summary pages orjournal entries for 2006 in the record, Exhibits 8-P and 9-P, covers the lab fees expense. - 26 - [*26] not introduce the checks he described or offer any other ev

Whether an expenditure satisfies the requirements for deductibility under section 162 generally is a question offact.

Whether an expense is ordinary is determined by time, place, and circumstance. Welch v. Helvering, 290 U.S. at 113-114. Where a taxpayerreports a business expense but cannot fully substantiate it, the Court generally may approximate the allowable amount. Cohan v. Commissioner, 39 F.2d 540 at 543-544. However, we may do so only when the ta

Schedule C Business Expenses Section 162 allows a taxpayerto deduct all ordinary and necessary expenses incurred in carrying on a trade or business.

Section 183(b)(1) provides that deductions that would be allowable without regard to whether such activity is engaged in for profit are to 9Mr.

at 9; emphasis added.] We went on to state that, if the fees were related to a partnership that was determined in the TEFRA proceeding to be a sham, then the payment of the fees would have lacked the “business-related, profit, or income motive that served as a precondition to deducting the fees under section 162, 183, or 212, respectively, the only statutory provisions that would have permitted such a deduction.” Id., slip op.

- 20 - [*20] Section 183(c) defines an activity not engaged in for profit as "any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." Deductions are allowable under section 162 or under section 212(1) or (2) ifthe taxpayer is engaged in the activity with the actual and honest objective ofmaking a profit.

rrectly reported a long-term capital gain of$68,973 for their 2007 tax year. 2Petitioners' counsel, Jeffrey Moffatt, claims we removed sec. 280A from consideration at trial. We did not. We merely stated that our primary factual concern at trial was sec. 162, and in directing the parties to file briefs, we specifically noted that the case involved sec. 280A issues. Furthermore, Mr. Moffatt's briefs do not conform to our Rules. Because the Court recognizes that its statements may have contributed

comply with the substantiation requirements in section 274(d). Respondent amended his answerto clarifythat he also believes petitioner failed to demonstrate that the claimed deductions were for ordinary and necessary business expenses as required by section 162. Petitioner filed an amended petition asserting its entitlement to additional deductions for travel expenses of$487,000 and $285,000 for tax years 2009 and 2010, respectively, that it had not claimed on its returns. Petitioner is a tort a

Business Expense Deductions Section 162 allows taxpayers to claim deductions for "ordinary and necessary" business expenses.

Sievers claims that he is entitled to business expense deductions under section 162 for materials and supplies for each year.

014 -2- [*2] concessions,2 the issues for decision are: (1) whether expenses that were related to petitioners' son's motocross racing activity and deducted by their construction business were ordinary and necessary for their business for purposes ofsection 162; (2) ifso, whetherthe expenses were reasonable; (3) whether petitioners may deduct section 179 expenses for a motorhome acquired for use in the motocross racing activity; and (4) whetherpetitioners are liable for section 6662(a) accuracy-r

Specifically, section 274(d)(4) provides that no deduction shall be allowed under section 162 for listed propertyunless the taxpayers substantiate, with adequate records, the following elements: (1) the amount ofthe expense; (2) the mileage - 12 - for each business use ofa vehicle as well as the total mileage for all purposes during the taxable period; (3) the date on which the vehicle was used; and (4) the business purpose oft

- 6 - Section 162 generally allows a deduction for ordinary and necessary expenses paid during the taxable year in carrying on a trade or business. Generally, no deduction is allowed for personal, living, or family expenses. See sec. 262. The taxpayer must show that any claimedbusiness expenses were paid primarily for business rather than personal, livin

Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.2 Generally, no deduction is allowed for personal, living, or family expenses, except where specifically authorizedby statute. See sec. 262. The 2An employee's performance ofservices is a trade or

Schedule C forNorth Carolina Activity Section 162 permits a taxpayerto deduct ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Business Expense Deductions Section 162 allows taxpayers to claim deductions for "ordinary and necessary" business expenses.

insurance payments for the business use ofone oftheir personal vehicles in Chicago. Petitioners do not dispute that Mr. Edwards' principal place ofbusiness was in Trinidad and Tobago and therefore it is his appropriate "tax home" for the purposes ofsection 162. Consequently, Mr. Edwards must then have traveled to Chicago, his - 19 - [*19] residential home, in pursuit ofhis trade or business in order for his related travel expenses to be deductible. In his briefMr. Edwards contended for the firs

Taxpayers must maintain records sufficient to substantiate section 162 deductions they claim.

Commissioner, 85 T.C. - 17 - [*17] 731, 742-743 (1985). We are unable to allow any deduction for telephone expenses. 7. Other Business Expenses Membership fees, such as bar or medical association dues, are deductible if they meet the requirements ofsection 162. Secs. 1.162-15(c), 1.274-2(a)(2)(iii)(b), Income Tax Regs. Petitioner introduced canceled checks evidencing payments totaling $1,125 to the American College ofPhysicians, the American Association for Cancer Research, and the Association o

Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred by the taxpayer in carrying on a trade or business, including 5Even ifpetitioner had substantiated her meal purchases, they would be more accurately characterized as nondeductible gifts to petitioner's covolunteers rather than meals "necessarily incurred" by

rived from the activity for the taxable year exceeds the deductions allowable under sec. 183(b)(1). An activity is "not engaged in forprofit" ifit is an activity otherthan one with respect to which deductions are allowable for the taxable year under sec. 162 or 212(1) or (2). Sec. 183(c). - 15 - [*15] and $1,079,292 and gambling losses of$339,832 and $1,232,005 during 2004 and 2005, respectively, (2) that using a session-based analysis,¹³ she had total gambling income of$36,216 and $231,836 and

Specifically, section 274(d)(4) provides that no deduction shall be allowed under section 162 for listed propertyunless the taxpayers substantiate, with adequate records, the following elements: (1) the amount ofthe expense; (2) the mileage - 12 - for each business use ofa vehicle as well as the total mileage for all purposes during the taxable period; (3) the date on which the vehicle was used; and (4) the business purpose oft

Specifically, section 274(d)(4) provides that no deduction shall be allowed under section 162 for listed propertyunless the taxpayers substantiate, with adequate records, the following elements: (1) the amount ofthe expense; (2) the mileage - 12 - for each business use ofa vehicle as well as the total mileage for all purposes during the taxable period; (3) the date on which the vehicle was used; and (4) the business purpose oft

The determination ofwhether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

- 4 - Discussion Car and Truck Expenses Section 162 allows as a deduction "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

Basic legal principles Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business.

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

Discussion Car and Truck Expenses Section 162 allows as a deduction "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

Carrying On a Trade or Business Section 162(a) provides that "[t]here shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

Deductions Section 162 permits taxpayers to deduct all ordinary and necessary business expenses paid or incurred during the taxable year.

Deductions are allowed under section 162 for the ordinary and necessary expenses ofcarrying on an activity that constitutes the taxpayer's trade or business.

6662(a) 2005 $9,297 $2,472 $1,859 2006 11,506 2,992 2,301 2007 4,384 739 877 2008 396 -0- 79 2009 941 -0- 188 After concessions, the issues for decision are: (1) whether petitioners may deduct, under section 162, expenses related to their use offour vehicles in 2005 and 2006; and (2) whetherpetitioners are entitled to bases in collectible gold coins they sold in 2007 and 2008 in excess ofthe amounts respondent allowed.2 '(...continued) Tax Court Rules ofPractice and Procedure.

trict substantiationrequirements and an allowance therefore may not be estimated by the Court. II. Unreimbursed Employee Expenses A taxpayerwho is an employeemay deductunreimbursedemployee expenses as an ordinary and necessary business expense under section 162. Sec. 162(a)(2); Lucas v. Commissioner, 79 T.C. 1, 6 (1982). The term "trade or business" includes performing services as an employee. Sec. 162(a)(2); Lucas v. - 7 - Commissioner, 79 T.C. at 6. In contrast, personal expenses, such as comm

ean nor the record in general discloses what "good standing" may signify. - 15 - C. UnreimbursedEmployee Expenses In general, a taxpayerwho is an employee may deduct unreimbursed employee expenses as an ordinary and necessary business expense under section 162. h, Lucas v. Commissioner, 79 T.C. 1, 6 (1982). In 2009 Mr. Jermihov paid union dues of$829 and Mrs. Jermihov paid union dues of$690. Most ofthe remaining expenses that petitioners seekto deduct relate to transportation, travel, and meals

Unreimbursed Employee Business Expenses Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.

- 12 - Section 183(c) defines an activity not engaged in for profit as "any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." Deductions are allowable under section 162 or under section 212(1) or (2) ifthe taxpayer is engaged in the activity with the "actual and honest objective ofmaking a profit".

r the years in issue, and all Rule references are tothe (continued...) SERVED SEP 1 7 2014 -2- [*2] concessions,2 the issues for decision are: (1) whetherpetitioners are entitled to deduct $6,535 for continuing dental education (CDE) expenses under section 162 for 2009; (2) whether petitioners are entitled to deduct an additional $2,652 for rental real estate expenses under section 212 for 2009; (3) whetherpetitioners failed to report $102,000 ofcancellation ofindebtedness (COD) income for 2010;

Business-expense deductions reported on Schedules E Section 162 allows deductions for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business, including expenses for repairs, advertising, and supplies.

ed petitioner's "commuting" betweenhis personal residence and principal place ofbusiness. See Horton v. Commissioner, 86 T.C. 589, 593-594 (1986). However, respondenthas conceded that petitioner's traveling expenses were ordinary and necessary under sec. 162 (and thus not commuting expenses). We fail to see how petitioner's flights could be considered ordinary and necessary business expenses under sec. 162 but not work done in . connection with the thoroughbred activity under sec. 1.469-5(f)(1),

Discussion Section 162 allows as a deduction "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".

"Until that time, expenses related to that activity are not 'ordinary and necessary' - 13 - expenses currently deductible under section 162 (nor are they deductible under section 212) but rather are 'start-up' or 'pre-opening' expenses." Woody v.

Section 183(c) provides: "For purposes ofthis section, the term 'activity not engaged in forprofit' means any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212." Section 1.183-2(b), Income Tax Regs., sets forth a nonexclusive list ofnine factors to be considered when ascertaining a taxpayer's profit intent.

Considering the foregoing facts and law, we conclude that the advocacy activity was not a trade or business under section 162 and that the Schedule C expenses in dispute fortax years 2008, 2009, and 2010 are not deductible.5 5Petitioners reported gross receipts or sales of$3,157 on their 2009 Schedule C, but we do not consider whetherthey substantiated any ofthe (continued...) - 10 - III.

Unreimbursed Employee Business Expenses Section 162 allows a taxpayerto deduct all ordinary and necessary expenses paid or incurred by the taxpayer in carrying on a trade or business.

Capitalizable indirect costs do not include taxes "assessed on the basis ofincome". Sec. 1.263A-1(e)(3)(iii)(F), Income Tax Regs. Ifpetitioner did not purchase the cigarette tax stamps and affix them to the cigarette packages, it could not offer the cigarettes for sale. Therefore the cigarette tax stamps are materials and supplies that pe

A business expense is ordinary for purposes ofsection 162 ifit is normal or customary within a particular trade, business, or industry and is necessary ifit is appropriate and helpful for the development ofthe business.

In order for a deduction to be allowed under section 162 or section 212(1) or (2), the taxpayermust establish that he "engaged in the activity with 'the predominant, primary or principal objective' ofrealizing an economic profit independent oftax savings." Giles v.

In addition to satisfyingthe criteria for deductibility under section 162, a taxpayermust satisfy the strict substantiation requirements ofsection 274(d) in order for a travel expense deduction to be allowed.

An activity is "not , engaged in for profit" ifit is an activity other than one with respect to which deductions are allowable for the taxable year under section 162 ör section 212(1) or (2).

Deductions are allowed under section 162 for the ordinary and necessary expënses ofcarrying on an activity that - 19 - constitutes the taxpayer's trade or business.

A taxpayer may not fully deduct expenses regarding an activity under section 162 or 212 ifthe activity is not engaged in for profit.

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

A business expense is ordinary for purposes ofsection 162 ifit is normal or customary within a particular trade, business, or industry and is necessary ifit is appropriate and helpful for the development ofthe business.

Section 183(c) defines an activity not engaged in for profit as "any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) ofsection 212."3 Section 162 allows a deduction for all the ordinary and necessary expenses paid or incurred in carrying on an activity which constitutes a trade or business ofthe taxpayer.

bstantiallyjustified, and consequently we will deny petitioners' motion. Background After an exhaustive review ofmultiple factors, on January 14, 2013, this Court determined that most ofthe Fletchers' compensation was reasonable and deductible under section 162. Thousand Oaks Residential Care Home I, Inc. v. Commissioner, T.C. Memo. 2013-10, at *33. Respondent has conceded that 2Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended and in effect

Section 162 Respondent contends that petitioner improperly claimed deductions for and failed to substantiate his miscellaneous business expenses. A taxpayer is entitled to deduct "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". Sec. 162(a). Such expenses must be directly connec

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

A taxpayer seeking to deducttrade or business expenses under section 162 must establish that the underlying activity was engaged in with an actual and honest profit objective.

No deductions under section 162 shall be allowed for "listed property", as defined in section 280F(d)(4), "unless the taxpayer substantiates by adequate records or by sufficient evidence corroborating the taxpayer's own statement".

For them to claim these as business deductions under section 162, the farming activity must be an activity engaged in for profit.

A trade or business expense is ordinary for purposes ofsection 162 ifit is normal or customary within a particular trade, business, or industry, and a trade or business expense is necessary ifit is appropriate and helpful for the development ofthe business.

- 44 - [*44] profit" as "any activity other than one with respect to which deductions are allowable for the taxable year under section 162 or under paragraph (1) or (2) of section 212." An activity constitutes a "trade or business" within the meaning of section 162--and it escapes the limitation ofsection 183--ifthe taxpayer's actual and honest objective is to realize a profit.

A trade or business expense is ordinary for purposes ofsection 162 ifit is normal or customary within a particulartrade, business, or industry, and it is necessary ifit is appropriate and helpful for the development ofthe business.

ax return. See Patterson v. Commissioner, T.C. Memo. 1979-362, 39 T.C.M. (CCH) 82, 84 (1979) (disapprovingthe "shoebox method" of recordkeeping). A taxpayermay deduct unreimbursed employee expenses as an ordinary and necessarybusiness expense under section 162. Lucas v. Commissioner, 79 T.C. 1, 6 (1982). The expenses must be directly or proximately related to the taxpayer's trade or business. Deputy v. du Pont, 308 U.S. 488, 493-495 (1940); sec. 1.162-1, Income Tax Regs. An employee's trade or b

After concessionsi the issues for consideration are: (1) whether petitioners may deduct expenses associated with their farmhouse under section 162 for tax years 2005, 2006, and 2007 on Schedules E, Supplemental Income and Loss; (2) alternatively, whether petitioners may deduct the claimed farmhouse expenses under section 212 on Schedules A, Itemized Deductions; and (3) whether petitioners are liable for the section 6662(a) accuracy-related penalties.

Whether an expenditure satisfies the requirements for deductibility under section 162 is a question offact.

Section 162 allows deductions for all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. A trade or business is an activity engaged in with "continuity and regularity". Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987). Section 212 allows deductions for individuals for all the ordinary

NSD Interests' contributions may be deductible pursuant to section 404(a) ifthey are "expenses which would be deductible under section 162 (relating to trade or business expenses) or 212 (relating to expenses for production ofincome)", but "only to the extent that they are ordinary and necessary expenses".

A taxpayer may not fully deduct expenses regarding an activity under section 162 or 212 ifthe activity is not engaged in for profit.