§179 — Election to expense certain depreciable business assets

Respondent has previously conceded additional depreciation of $5,228 for each year with respect to a combine and an additional section 179 deduction of $9,800 with respect to a flatbed trailer for 2013. Respondent argues that the depreciation and other deductions claimed in connection with petitioners’ pickup trucks and other vehicles are subject to the strict substantiation requirements of section 274(d). Petitioners argue that section 274(d) is inapplicable to the pickup trucks because each wa

We also note that, unlike most motorhomes, petitioners' motorhome had a rear wall that folded down at the push ofa button to make a ramp that Ben used to roll motorcycles up into the motorhome for transport and repairs. We find that the motorhome was not used predominantly for lodging. Accordingly, petitioners were entitled to deduct its cost under section 179.

179 (relating to election to expense certain.depreciable assets) does not apply to any of the capitalized items involved in the instant cases.

179 (relating to election to expense certain.depreciable assets) does not apply to any of the capitalized items involved in the instant cases.

Unlike her 100-to-1000-customer businesses, this business served only 10 to 20 customers annually, she said, but she still couldn' t name anyone even from this putatively smaller customer base. I. Notary/Process Server Service Notary/Process Server Service' s Income as Reported on Schedule C Year Gross Income Net Income .Net Cash Income 2001 $35,528 ($8,477) ($4) 2002 43,202 (10,970) 307 2003 32,263 (9,004) 1,838 Notary/Process Server Service's Expenses Disallowed by Commissioner Year Depr./§179

The drip irrigation systems, unlike the trellising, are, to a great extent, buried in the ground. Parts of it may be repaired and maintained like the trellises, but a substantial portion of it is under the ground and will remain there until the vines die or are removed for some other reason. This Court has already decided that grapevines are not “tangible personal property” for purposes of section 179.

Respondent disallowed deductions claimed on that Schedule C for car and truck expenses of $1,395, - 3 - depreciation expense/section 179 expenses of $9,986, and rent expense of $4,400. Respondent contends that the documents offered by petitioner provide insufficient evidence to support the claimed deductions. Section 7491 is inapplicable here because petitioner has not complied with the requisite substantiation requirements.

179 expenses, respectively. 4A statutory exception that was added in 1993 provides that certain real estate operators need not treat their interests in rental real estate as passive activities. Sec. 469(c)(7). That exception is inapplicable here, because the subject of this controversy is personal property.

- 22 - [*22] Finally, we are not convinced that the recovery petitioners sought with re- spect to their insurance claim was so unlikely that they could claim a deduction for 2010.

"Because petitioner has failed to satisfy the exclusive use test, we need not decide whether petitioner's home office was his principal place of business or a place of business used by clients or customers in meeting or dealing with petitioner in the course of his trade or business.

It is unclear whether petitioners placed the item in service, in 2003 or in 2004 after the lease on the Land Rover expired .

We disagree with respondent on each ground and conclude that the property Edwards installed in Building 200 qualifies as EECBP under section 179D(c)(1).

Accordingly, we hold that petitioner has not met his burden with respect to the claimed deduction; thus, respondent’s disallowance of petitioner’s depreciation and section 179 expense deduction claimed on Schedule C for taxable year 2017 is sustained.

(Phoenix), (2) whether Phoenix is entitled to deduct car racing expenses for 2014 and 2015, (3) whether Phoenix is entitled to a deduction pursuant to section 179 for an excavator and a utility trailer for 2014, (4) whether Phoenix has cost of goods sold of $33,294 for building permits for 2014, (5) whether petitioners are entitled to deduct depreciation of $8,000 reported on Schedule C, Profit or Loss From Business, for 2015, (6) whether petitioners are lia

(Phoenix), (2) whether Phoenix is entitled to deduct car racing expenses for 2014 and 2015, (3) whether Phoenix is entitled to a deduction pursuant to section 179 for an excavator and a utility trailer for 2014, (4) whether Phoenix has cost of goods sold of $33,294 for building permits for 2014, (5) whether petitioners are entitled to deduct depreciation of $8,000 reported on Schedule C, Profit or Loss From Business, for 2015, (6) whether petitioners are lia

Under section 263(a), we hold petitioners were not pennitted to deduct the car expense for 2010.

- 7 - [*7] On the basis ofthe record in this case, we hold that the burden ofproofhas not shifted to respondent because petitioners did not comply with all substantiation requirements regarding their business and personal use ofthe Navigator.

We hold that petitioner did not properly substantiate any ofits advertising expenses and thus is not entitled to any deduction.

We hold that petitioner did not properly substantiate any ofits advertising expenses and thus is not entitled to any deduction.

Section 179 provides that a taxpayermay elect to treat the cost ofany section 179 property as an expense which is not chargeable to a capital account.

Section 179 provides an election to expense certain depreciable business property.

Thus, his activities also qualify as a trade or business pursuant to section 179.

We hold that they are not; (2) whether petitioners are liable for an increased deficiency arising from the disallowance of other flowthrough expenses from Bantam associated with the maintenance of an aircraft.

We hold that they may not.

Because the OCC assets were purchased as a going concern and thus placed in service during 2004, we hold that the corporation is not entitled to the $20,500 claimed section 179 expense deduction in 2005 .

Accordingly, we hold that the contract is *lease agreement and that petitioners are not entitled to the claimed section 179 expense deduction .

1990-42.9 (DMS-10 switch and toll carriers were part of,an integrated telephone system) Accordingly,, we hold,that the equipment petitioner purchasedin 2002 and .2003 was placed in service in .2004 and that petitioner is entitled to the depreciation and section 179 deductions : claimed on his 2004=and 2005 returns .- -We have considered all'of,the parties', contentions, .

Therefore, we hold that petitioner failed to prove that he is entitled to any employee business expense deductions in excess of those respondent allowed .

We hold that (1) the conceded $2,708'is allowable in addition to the $3,942 respondent allowed in the notice of deficiency and (2) respondent' s disallowance of the remaining $1,752 is sustained as part of the $19,915 disallowed in the notice of deficiency .

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

To deduct depreciation pursuant to section 179 for property subject to section 280F, such as automobiles, a taxpayer must establish that business use exceeds 50 percent.

Section 179 provides that a taxpayer may elect to treat the cost of any section 179 property as an expense which is not chargeable to a - 15 - capital account .

79, 83-84 (1992) ., Alternatively, the cost may be expensed pursuant to section 179 if the requirements of that section are satisfied .

Consequently, we hold that petitioners have failed to substantiate their bases in the buildings .

Alternatively, the cost may be expensed pursuant to section 179 if the requirements of that section are satisfied .

Alternatively, the cost may be expensed pursuant to section 179 if the requirements of that section are satisfied .

Child Care Business Petitioner claimed a deduction of $3,000 pursuant to section 179 for the purchase of a computer and printer in connection with her child care business.

At trial the parties stipulated orally that the entire cost of the computer purchased in February 1999 was $2,349 and that this amount properly was deductible as petitioner’s business expense in 1999 pursuant to section 179.

However, such cost may be expensed pursuant to section 179 if the requirements of that section are satisfied.

Accordingly, we hold that respondent did not abuse his discretion in refusing to consent to petitioner’s request to revoke (modify) the 1995 election under section 179.

1998-356 (applying section 179(b)(3)(A) to an "S" corporation).

- 7 - that he drove during that year and the method of depreciation that he used in calculating the $17,723 of "Depreciation and section 179 expense deduction" that he claimed in Schedule C . On the record before us, we find that petitioner has failed to carry his burden of establishing that he is entitled for his taxable year 2003 under section 167(a) to the $17,723 "Deprecia- tion and section 179 expense deduction" that he claimed in Schedule C . Addition to Tax Under Section 6651(a)(1) and Ac

the trellises, but substantial portions of them are under the ground and will remain there until the vines die or are removed for some other reason. This Court has already decided that grapevines are not “tangible personal property” for purposes of section 179. See Kimmelman v. Commissioner, 72 T.C. 294, 308 (1979), where the Court held that “the grapevines are an ‘inherently permanent structure’ within the meaning of section 1.179-3(b), Income Tax Regs., and therefore, the grapevines are not t

Petitioner deducted $10,000 of the $24,729 under depreciation as a section 179 expense and deducted the rest, $14,729, on the "supplies" line of Schedule C of the 1989 return.

f the sign as a capital expenditure and not as a Schedule C advertising expense deduction for the 1994 tax year. b. Equipment Petitioners reported equipment costs of $10,000 on Form 4562 for the 1994 tax year and elected to expense that amount under section 179. Petitioners also claimed depreciation deductions in the amount of $884 on 3-year property with a depreciation basis of $2,652. In total, petitioners claimed depreciation and section 179 expense deductions in the amount of $10,884 for the

After concessions by the parties, the issue remaining for decision is whether petitioner is entitled to a section 179 expense deduction for 1994 in excess of the amount allowed by respondent.

f the sign as a capital expenditure and not as a Schedule C advertising expense deduction for the 1994 tax year. b. Equipment Petitioners reported equipment costs of $10,000 on Form 4562 for the 1994 tax year and elected to expense that amount under section 179. Petitioners also claimed depreciation deductions in the amount of $884 on 3-year property with a depreciation basis of $2,652. In total, petitioners claimed depreciation and section 179 expense deductions in the amount of $10,884 for the

sts were referred to by the parties and in billing statements as “wireless equipment.” While such amounts might have been capitalized under section 263(a) and Treasury Regulation § 1.263(a)-2(d),8 they could also have been immediately deducted under section 179. Because Ms. Chappell is a cash basis taxpayer, we allow the monthly installments on the Apple and Samsung cell phones (as included in the monthly phone charges detailed above) to be deducted under section 179. E. Summary of Phone and Wir

Office furniture is a capital asset, and, barring an election under section 179, petitioners were not entitled to deduct for 2013 the full cost ofthe furniture.

A taxpayer may elect to deduct as current expenses the cost ofsection 179 property acquired and used in the active conduct ofa trade or business and placed in service during the year.

On the 2006joint income tax return, petitioners claimed a net loss in connection with the micro-utility activity of$9,699, which was primarily the result ofa section 179 expense deduction for the solar water heating system purchased in 2006.

The issue for decision i s whether petitioners are entitled to a-section 179 deduction .

.) SERVED :APR 2 6 20071 - 2 - The issues for decision are : (1) Whether petitioner is entitled to section 179 expense and section 167 depreciation deductions; (2) whether petitioner has sufficient basis in a partnership entitling him to deduct partnership losses ; and (3) whether petitioner is liable for an accuracy-related penalty pursuant to section 6662(a) .

The Schedule K-1 reported ordinary income of $4,492 and a section 179 deduction of $604.

o w pursuant to section 179, the $3,450 spent by petitioner Michael H.

This schedule listed the following amounts: Gross receipts $11,400 Expenses Car and truck $2,018 Depreciation and section 179 expense 2,248 Mortgage interest 5,100 Legal and professional services 45 Office 418 Repairs and maintenance 80 Supplies 150 Taxes and licenses 810 Total expenses (10,869) Net profit 531 Petitioners have conceded that this schedule should not have been filed because Ms.

bligated Ps to make substantial permanent improvements to the leased space at their own expense. Other than trade fixtures, the permanent improvements Ps made to the leased space became the property of the lessor upon installation. Ps did not make a sec. 179, I.R.C. 1986, election on their timely filed tax return for either 1995 or 1996. Ps did not file a timely amended tax return for either 1995 or 1996. 1. Held: Ps’ expenditures for the permanent improvements they made to the leased space cons

for the year in issue. - 2 - Respondent determined a deficiency of $4,060 for petitioner’s 1995 Federal income tax. The issue before the Court is whether expenses incurred by petitioner in purchasing a tractor and a fuel tank are deductible under section 179. Petitioner resided in Williamsburg, Virginia, at the time the petition was filed. Petitioner is a full-time practicing neurologist with medical offices in Williamsburg and Newport News, Virginia. Petitioner purchased 49 acres of land in 19

. Petitioner now asserts that he is entitled to depreciation deductions of $53,000 with respect to the King Air, based on an asserted 5-year useful life of the aircraft and the availability of additional $10,000 “first-year depreciation” pursuant to section 179. Respondent concedes that petitioner is entitled to a 1991 depreciation deduction of $32,153 with respect to the King Air, based on a 7-year class life and the half-year convention under section 168. Section 167(a)(1) allows as a deprecia

f $5,305. After concessions, the issue remaining for our consideration is whether respondent abused his discretion in refusing to grant consent to petitioner to revoke (modify or change) his 1995 election to expense depreciable business assets under section 179. Background Sam H. Patton (petitioner) resided in Houston, Texas, on October 22, 1999, the date his petition was filed. Petitioner was self-employed as a welder during the 1995 calendar year. Petitioner timely filed his 1995 Federal incom

automobile and travel and meals and entertainment expense deductions; (7) whether petitioners are entitled to claim for 1994 an additional expense under section 179 for a depreciable asset; and (8) whether there is underpayment of petitioners' tax due to negligence.

ontracted all of his cargo hauling assignments during 1994 through Knox Cartage in Knoxville, Tennessee. Typically, 2 At trial, respondent conceded that petitioner is entitled to a Schedule C, Profit or Loss From Business, deduction of $10,000 under sec. 179 for the cost of a Volvo tractor-truck petitioner purchased during 1994 for use in his truck driving activity. Other adjustments in the notice of deficiency are computational and will be resolved by the Court’s holdings on the contested issue

s vehicle in 1985. Petitioners reported that they made improvements totaling $2,099 in 1985 and $2,883 in 1986. Petitioners claimed deductions totaling $18,517 between 1985 and 1989 for depreciation, including a $2,099 deduction in 1985 pursuant to section 179. In December 1990, the bus was destroyed by fire. In early 1991, petitioners received $58,475 from their insurance provider for the replacement value of the converted bus. Rather than repeat the conversion process on a different bus, petit

After concessions by the parties,2 the issues for decision are as follows: (1) Whether petitioners' tobacco barn is section 179 property; and, (2) What is the applicable recovery period for petitioners' tobacco barn.

on, for the 1991, 1992, and 1993 tax years; (3) whether Special O, Inc., is entitled to claim travel expenses for the 1991, 1992, and 1993 tax years; (4) whether Special O, Inc., is entitled to expense certain depreciable business assets pursuant to section 179 for 1993; and (5) whether petitioner is liable for accuracy-related penalties pursuant to section 6662(a) for the 1991, 1992, and 1993 tax years.

The issues are whether petitioners are entitled to a deduction in the amount of $17,500 under section 179 and whether petitioners are liable for the accuracy-related penalty under section 6662(a).

Respondent further argues that petitioner failed to make a proper section 179 election which is required for the computer to be treated as a currently deductible expense.

aimed deduction was intended to be for depreciation of equipment purchased during 1992. Petitioner submitted a number of checks in support of the claimed deduction. She contends that she properly deducted the entire cost of the equipment pursuant to section 179. Section 179 allows a taxpayer to elect to treat the cost of section 179 property as a current expense in the year such property is placed in service within certain dollar limitations. - 10 - Sec. 179(a). An election under section 179 mus

ction for, or present any other evidence to substantiate, expenditures for the use of a home office. 12. Computer Cost Although not claimed on her Schedule C, petitioner contends that the $2,200 cost of the computer she purchased is deductible under section 179. Petitioner offered a copy of her credit card statement dated May 16, 1994, which indicates that she purchased a computer for $2,200. Petitioner testified that she used the computer exclusively for her business with APIA. On the basis of

(2) Chevrolet Cavalier Petitioner claimed a section 179 deduction of $2,660 for the Cavalier.

(1) Whether petitioners have substantiated the basis of their stock in Vosburg Hotels, Inc., a "small business corporation" under section 1366,1 so as to enable them to claim a deduction for an ordinary loss of $129,083 and a deduction pursuant to section 179 of $3,057; (2) whether petitioners are entitled to a long-term capital loss carryover from 1987 of $61,468; and (3) whether petitioners' taxable income should be increased in the amount of $7,399 for Social Security benefits received durin

The deficiency is due to the decreased NOL carryover from 2014 applied to 2015 and a reduction to the section 179 depreciation deduction but offset by an increased AMT NOL carryover.

7 [*7] Expense Amount Wages ($57,608) Other Expenses 1,800 Taxes and Licenses 5,045 Depreciation and § 179 Expense 50,576 Car and Truck 40,415 Cost of Goods Sold 234,344 The section 179 expense is for the Suburban, which Ms.

The 2017–19 Schedules F state that its principal crop or activity was “Hay/Pecans.” The 2020–21 Schedules C state that its principal business or profession was “event venue.” 23 The Youngs’ claimed 2013 depreciation expense includes $87,018 of section 179 expenses for the full costs of acquiring the following machinery, equipment, and horses in 2013: (1) “7’ Ground Hog Equipment” ($3,650); (2) “Heel-O-Matic Trainer” ($3,545); (3) “Horse Walker” ($26,608); (4) “Gates/Wiring” ($17,715); (5) Drifte

Friedman 49,633 40,825 Total $785,335 $645,965 Except for insignificant amounts reported as section 179 deductions, petitioner reported all of the income allocated to its members as net earnings from self-employment.

Depreciation and Section 179 Expense Section 167(a) allows a deduction for the exhaustion, wear and tear, or obsolescence of property used in a trade or business.

9 −7,992 Depreciation and § 179 expense deduction, Sched.

stribution Less: distribution 7,806,000 2,150,000 1,148,000 2,752,000 Stock basis 5,040,846 3,444,331 2,472,530 378,741 available for loss Ordinary loss per — — — — 1120S return (or as adjusted/amended) Nondeductible (239,535) — (50,154) — expenses Section 179 (108,000) — — — expense deduction Ending stock basis 4,693,311 3,444,331 2,422,376 378,741 Excess loss over — — — — stock basis 7 [*7] 2010 2011 2012 2013 Stock basis before $2,507,005 $860,865 $14,597 $2,438 distribution Less: distributio

For the “Sch C STOVES, FIREPLACES” business he attached Form 4562, Depreciation and Amortization, on which he claimed (among other things) a section 179 deduction for the mower, the tractor, and a “Chevy Silverado 2015” truck.

7 [*7] Expense Amount Advertising $1,129 Commissions and fees 5,033 Depreciation and § 179 deduction 321 Insurance 3,005 Legal and professional services 400 Office expense 216 Rent or lease other business property 24,143 Repairs and maintenance 2,053 Meals and entertainment 816 Utilities 1,787 Wages 4,316 Other expenses 8,315 Total $51,534 As substantiation for the disallowed deductions, petitioner proffered a profit and loss state

Section 179 permits taxpayers to elect to deduct the full cost of section 179 property for the year it is placed in service. § 179(a). Section 179 property includes tangible property to which section 168 applies. § 179(d)(1)(A)(i). To the extent the property is used for nonbusiness purposes, the deduction is permitted for the portion of the cost of

The expenses consisted of $10,133 for car and truck expenses for driving the 2000 Dodge truck 18,940 miles; $1,875 for depreciation and section 179 expenses; $2,231 for other interest; $511 for office expenses; $2,601 for supplies; $1,111 for meals and entertainment expenses; $4,500 for utilities; and $16,143 for other expenses, consisting of $127 for postage, $1,417 for power tools, $12,317 for Lend-A-Hand, $1,442 for a cell phone, and $840 for a storage building, i.e., rental of

The total expenses consisted of $4,066 for advertising; $976 for depreciation and section 179 expenses; $1,068 for legal and professional services; $126 for office expenses; $616 for rent or lease of vehicles, machinery, and equipment; $215 for supplies; $2,787 for travel expenses; $281 for meals and entertainment expenses; and $5,126 for utilities.

The reported business expense deductions consisted of the following: Advertising $30,487 Depreciation and Section 179 183,600 Insurance (other than health) 2,800 Legal and Professional 30,180 Meals and Entertainment 3,555 Office Expense 3,400 Other Expense 4,660 Rent / Lease – Other Business Property 54,250 Repairs and Maintenance 7,200 Supplies 7,575 Taxes and Licenses 4,753 Travel 6,953 Utilities 5,390 Wages 65,020 Total $409,823 In the notice of def

The expenses consisted of $14,710 in car and truck expenses, $209 in depreciation and section 179 expenses, $180 in legal and professional services, $361 in taxes and licenses, and $18,644 in other expenses.

These expenses included $1,000 for a used MacBook laptop, which petitioners made a section 179 election to deduct as a current expense, $200 for a used Nexus 7 tablet, and a used HTC One smartphone.

as having purchased a tractor as opposed to a forklift. The notice also neglects to mention whether either the plow or the forklift was an attachment. This error is harmless since both forklifts and tractors are qualified nonpersonal property under section 179. See Treas. Reg. § 1.274- 5(k)(2)(ii)(K) and (Q); John C. Hom & Assocs. v. Commissioner, 140 T.C. 210, 213 (2013) (“Mistakes in a notice will not invalidate it if there is no prejudice to the taxpayer.”) At trial, however, Boyum testified

roperty is placed in service. The election must be made on the taxpayer’s return. § 79(c). FMC’s 2008 and 2009 returns claimed depreciation deductions for its airplane and did not elect to deduct for either year the entire cost of the airplane under section 179. Nevertheless, the IRS’s challenge to the depreciation deductions for FMC’s airplane is that the airplane was never placed in service within the meaning of “[s]ection 179(a).” Both sections 167 and 179 require that the property be placed

(C&J Farms), and (2) whether expenses incurred by Prairieland Farms (Prairieland) related to the purchase of semi-trucks in tax year 2014 are fully deductible by Prairieland under section 179.2 For the reasons set forth below, we answer both questions in the negative.

oe reported the following income and expense items on Forms 1040, Schedules C: 2014 2015 Gross income $37,360 $23,860 Expense Advertising 1,347 685 Car and truck 20,171 13,694 Commissions and fees 2,152 -0- Contract labor 2,535 -0- Depreciation and sec. 179 1,696 1,206 Legal and professional 2,786 6,000 Office 2,351 9,810 Rent or lease of vehicles, machinery, and equipment -0- 980 Repairs and maintenance 1,275 -0- Supplies 2,594 2,526 Taxes and licenses 2,151 -0- Travel 6,437 9,633 Deductible me

If the property is used for both business and other purposes, then the portion of the cost that is attributable to the business use is eligible for expensing under section 179 only if more than 50% of the use is for business purposes.

at 305, filed by the widow and legal heir, the “legal representatives of * * * [Mr. Ramsay’s] personal estate”); Saracena (continued...) -5- that “[i]f a petitioner dies, the Court, on motion of a party or the decedent’s successor or representative or on its own initiative, may order substitution of the proper parties.” But befo

Specifically, this deduction consisted of $1,502 of expenses for his laptop computer, tools, printer, and hard drive, which he elected to expense under section 179, and job-related expenses of $4,523.6 After examination, the IRS sent Mr.

The election must specify the items of section 179 property to which the election applies and the portion of the cost of each which is to be taken into account under subsection (a).

2014 Petitioners attached Form 4562, Depreciation and Amortization, to their tax return for 2014 and claimed deductions for section 179 expenses of $12,637, a special depreciation allowance for qualified property placed in service during 2014 of $5,250, a modified accelerated cost recovery system (MACRS) deduction for assets placed in service before 2014 of $17,691, and a deduction for 15-year property placed in service during 2014 of $263.

On his 1999 Schedule C for Number One Foundations, Steven reported gross receipts of$800,327, cost ofgoods sold of$348,750, and total expenses of - 11 - [*11] $337,751 (consisting of$32,869 for car and truck expenses, $26,531 for depreciation and section 179 expenses, $31,051 for insurance, $1,706 for interest other than mortgage interest, $3,000 for pension and profit-sharing plans, $42,512 for supplies, $17,185 for taxes and licenses, $165 for meals and entertainment, $1,659 for utilities, $17

ners reported the gross receipts and expenses attributable to Mr. Hakkak's provision oflegal services as a sole 6This amount was based on Z Dean Hakkak's total income of$1,593,616 and total deductions of$1,241,649 and Mr. Hakkak's pro rata share ofa sec. 179 deduction of$530, as reported on Z Dean Hakkak's Form 1120S, U.S. Income Tax Return for an S Corporation, for 2011. 7As relevant here, the reported allowed passive losses from Joshua Plaza and Conroe Plaza totaled $20,260 and $55,155, respec

aintenance 1,881 2,583 $8,702 Misc. 1,125 --- --- Meals 164 330 445 Accounting 350 350 613 Gasoline, fuel, and oil 653 3,029 2,583 Insurance (other than health) --- 312 2,799 Travel --- 207 137 Software --- 175 --- Dues --- --- 45 Depreciation and sec. 179 expense 5,310 3,533 24,756 In the notice ofdeficiency respondent denied petitioner's charitable contribution deduction for each year on the ground that he had already deducted more than the Conservation Easement's value for previous tax years.

Legal and professional 2,979 2,979 2,700 279 Interest 28,181 28,181 5,965 22,216 Insurance 17,070 17,070 12,351 4,719 Commissions and fees 125,952 125,952 125,952 --- Utilities 5,239 5,239 5,239 --- Office expenses 3,060 3,060 3,060 --- Depreciation/sec. 179 expense 36,179 36,179 --- 36,179 Car and truck expenses 756 756 --- 756 Advertising 435 435 435 --- Repairs and maintenance 71 71 71 --- i. Wages On briefrespondent concedes that petitioners have substantiated BJW- related wages of$65,208, l

the Schedules C as follows: 2009 2010 2011 Income: Gross receipts or sales $23,608 $31,752 $3,410 Gross income 23,608 31,752 3,410 Expenses: Advertising 4,200 4,500 9,500 Car and truck -0- -0- 9,535 Contract labor 22,708 30,252 -0- Depreciation and sec. 179 1,438 589 351 Legal and professional services 5,000 5,000 5,171 Office expense 2,800 2,300 9,938 Rent or lease other business property 20,200 20,292 -0- Repairs and maintenance -0- -0- 4,644 Supplies 900 1,050 4,250 Taxes and licenses 1,050

Schedule K, Partners' Distributive Share Items, ofGASP's 2012 return reports a section 179 deduction of$9,300 that is not included in the total deductions taken into account in computing the partnership's ordinary business income.

Legal and professional 2,979 2,979 2,700 279 Interest 28,181 28,181 5,965 22,216 Insurance 17,070 17,070 12,351 4,719 Commissions and fees 125,952 125,952 125,952 --- Utilities 5,239 5,239 5,239 --- Office expenses 3,060 3,060 3,060 --- Depreciation/sec. 179 expense 36,179 36,179 --- 36,179 Car and truck expenses 756 756 --- 756 Advertising 435 435 435 --- Repairs and maintenance 71 71 71 --- i. Wages On briefrespondent concedes that petitioners have substantiated BJW- related wages of$65,208, l

eferences are to the Tax Court Rules ofPractice and Procedure. All monetary amounts are rounded to the nearest dollar. 2Petitioner conceded respondent's $136 adjustment to his interest income and $39,758 adjustment to his Schedule C depreciation and sec. 179 expenses. - 3 - [*3] School ofBusiness at Dartmouth. In 2003 petitioner married Wendy Liu, with whom he had one child. On February 17, 2007, petitioner and Ms. Liu purchased a timeshare property in Las Vegas, Nevada (timeshare property). In

Legal and professional 2,979 2,979 2,700 279 Interest 28,181 28,181 5,965 22,216 Insurance 17,070 17,070 12,351 4,719 Commissions and fees 125,952 125,952 125,952 --- Utilities 5,239 5,239 5,239 --- Office expenses 3,060 3,060 3,060 --- Depreciation/sec. 179 expense 36,179 36,179 --- 36,179 Car and truck expenses 756 756 --- 756 Advertising 435 435 435 --- Repairs and maintenance 71 71 71 --- i. Wages On briefrespondent concedes that petitioners have substantiated BJW- related wages of$65,208, l

Section 179 permits a taxpayerto elect to treat the cost ofcertain types of tangible property not as a capital expense but as a deduction for the year in which the property is first placed in service, up to specified dollar limits. See secs. 179(a) and (b), 263(a)(1)(G). An election to treat the cost ofproperty as deductible under section 179 must

Business Expenses, and Form 3903, Moving Expenses. In each of those Schedules C, petitioners reported the following: 2012 2013 Gross income $250 $4,500 Expense: Advertising 110 200 Car and truck 1,790 1,139 Contract labor 5,000 250 Depreciation & sec. 179 1,114 2,150 Legal & professional services 450 4,400 Office 550 1,200 Repairs & maintenance 7,500 5,500 Supplies 655 350 Taxes & licenses -0- 440 Travel 4,500 1,200 Deductible meals and entertainment 275 125 Utilities 2,055 600 Other--Bank fees

Depreciation and Section 179 Deductions Section 167(a)(1) allows depreciation deductions "for the exhaustion, wear and tear" ofproperty used in a taxpayer's trade or business, determined under section 168(a) on the basis ofthe applicable depreciation method, convention, and recovery period.

After concessions, the issues for decision are whether petitioner: (1) was engaged in the trade or business ofgambling in 2014; (2) had unreported gambling losses up to the amount ofhis gambling income for 2014; (3) is entitled to depreciation and section 179 deductions in excess ofwhat respondent has already allowed for each year in issue; (4) is entitled to deductions claimed on Schedule A, Itemized Deductions, in excess ofwhat respondent has already allowed for each year in issue; (5) is enti

's gross income by the amounts determined to be diverted to Sunrise from BCO, (2) disallowing Sunrise's depreciation deductions that respondent detennined were for assets not shown to be used in an active trade or business, (3) disallowing Sunrise's section 179 expense deductions for 2004 and 2005 because the assets were not shown to be used in conducting an active trade or business, and (4) disallowing certain business expense deductions claimed by Sunrise that respondent identified as petition

The Schedule C shows $50,066 ofgross receipts and the following deductions: Expense Amount Advertising $8,684 Car and truck¹ 4,093 Depreciation and section 179 7,844 Insurance (other than health) 307 Legal and professional 6,086 Office 3,985 Rent or lease ofvehicles, machinery, and equipment 3,083 Rent or lease ofother business property 3,888 Repairs and maintenance 6,346 Supplies 1,190 Travel 1,852 Deductible meals and entertainment 1,168 Other 10,016 ¹Petitioners computed the car and truck e

's gross income by the amounts determined to be diverted to Sunrise from BCO, (2) disallowing Sunrise's depreciation deductions that respondent detennined were for assets not shown to be used in an active trade or business, (3) disallowing Sunrise's section 179 expense deductions for 2004 and 2005 because the assets were not shown to be used in conducting an active trade or business, and (4) disallowing certain business expense deductions claimed by Sunrise that respondent identified as petition

Depreciation and Section 179 Deductions Section 167(a)(1) allows depreciation deductions "for the exhaustion, wear and tear" ofproperty used in a taxpayer's trade or business, determined under section 168(a) on the basis ofthe applicable depreciation method, convention, and recovery period.

Contract labor $9,000 Yes -0- --- Depreciation and section 179 64,600 Yes $49,103 Yes expense deduction Legal and professional services 700 No -0- --- Office 2,388 No -0- --- Repairs and maintenance 2,152 No -0- --- Other (i.e., fuel) 4,732 Yes -0- --- Total 83,572 --- 49,103 --- Trial.

d employee expenses as reported on Forms 2106, Employee Business Expenses: -7- Expenses 2014 201_5 Parking fees, tolls, and transportation $840 $880 Travel expenses 7,140 3,000 Business expenses:¹ Cell phone service 600 --- Internet service 540 --- Section 179 1,400 --- Total business expenses 2,540 3,410 Meals and entertainment (after 50% limitation) 5,070 5,290 Total unreimbursed employee expenses 15,590 12,580 ¹As shown on statement 1 to his Form 2106 for tax year 2014, petitioner's "business

esn't actually affect our findings.) These are the yacht-related deductions that Becnel claimed and the Commissioner disallowed: Type ofdeduction 2009 2010 2011 Insurance $10,156 $22,936 $16,789 Other expenses 110,814 29,733 30,350 Depreciation and section 179 expense 28,272 24,199 18,094 Repairs and maintenance 245,239 7,766 47,926 Supplies --- 42,277 --- Total 394,481 126,911 113,159 Most ofthese deductions were components oflarger totals on Sunrise's Schedules C, and not all ofthem are necess

Weaver conducted that reports the following amounts: - 3 - Description Amount Gross receipts or sales $1,510 Returns and allowances 300 Gross profit $1,210 Expense: Advertising 1,500 Car and truck 9,612 Contract labor 7,500 Depreciation and section 179 156 Office 400 Rent or lease 4,800 Repairs and maintenance 1,600 Supplies 50 Travel 150 Deductible meals and entertainment 3,105 Utilities 1,550 Wages -0- Cell phone 2,575 Total (32,998) Net loss (31,788) The $9,612 deduction Mr.

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

The expenses consisted of$10,239 for car and truck expenses for driving the 2000 Dodge 18,123 miles; $530 for depreciation and section 179 expenses; $2,181 for other interest; $840 for rent or lease ofother business property; $2,176 for supplies; $388 for meals and entertainment; and $12,597 for other expenses, which included $1,377 for power tools, $408 for uniforms, $9,360 for Lend-A-Hand, and $1,452 for a cell phone.

Sched- ules C they reported zero gross receipts for each year and expenses as follows: Item 2012 2013 Meals and entertainment $110 $150 Taxes and licenses 300 300 Supplies 265 300 Repairs and maintenance 60 40 Office expenses 60 50 Depreciation and sec. 179 expense 200 --- Advertising 125 124 Travel 2,486 11,700 - 5 - [*5] Car and truck expenses 17,633 20,527 Expenses for business use ofhome 12,370 5,466 Other expenses 140 250 Utilities 2,140 1,380 Total 35,889 40,287 Petitioners also included

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

Respondent allowed an increase in a depreciation deduction and section 179 expense of$9,952 for 2010.

Respondent's disallowances are as follows: - 5 - [*5] Expense Taxable year Amount Travel 2013 $7,036 Office 2013 7,570 Car and truck 2013 18,027 Rent/lease-other business property 2014 50,200 Depreciation and section 179 2014 10,676 Commissions and fees 2014 6,671 Petitioner timely petitioned this Court, and a trial was held in San Francisco, California.

d 2014 petitioners reported no gross receipts on their Schedules C for petitioner husband's investment management business. On their Schedules C petitioners claimed deductions for the following: Deduction Tax year 2013 Tax year 2014 Depreciation and sec. 179 expense deduction $12,920 $22,887 Insurance (other than health) 1,874 2,099 Interest (other) 3,361 3,618 Repairs and maintenance 11,053 8,594 Taxes and licenses 1,411 1,320 Aviation fuel 1,226 1,714 Hangar airport -0- 709 Total 31,845 40,941

Schedule C expenses remaining in dispute comprise depreciation and section 179 expenses of$20,452, taxes and license expenses of$2,177, and research and development expenses of$5,754.

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

RIP Design prepared Form 1120S for its taxable year 2013 (2013 Form 1120S).8 In its 2013 Form 1120S, RIP Design reported gross receipts or sales of $204,353 and claimed cost ofgoods sold of$63,184, total income of$141,169, total deductions of$108,260, ordinary business income of$32,909, and a section 179 deduction of$2,785.

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

The expenses consisted of$2,200 for advertising, $11,834 for car and truck expenses, $2,003 for depreciation and section 179 expenses, $1,874 for legal and professional services, $2,016 for office expenses, $890 for supplies, and $7,356 for utilities.

Furthermore, the notice disallowed all ofAltermeds, LLC's Schedule C business-expense deductions for tax years 2010 and 2011 on section 280E grounds, except for depreciation and section 179 expenses in the amounts of $49,671 and $719 for tax years 2010 and 2011, respectively.

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

Therein respondent disallowed petitioners' special allowance for depreciation, stating: "We have disallowed the deduction you claimed for a Section 179 expense because the property does not qualify as Section 179 property."" Respondent also disallowed petitioners' energy credit, ¹° The $255,000 figure is the difference between $300,000, petitioners' purported basis in the solar equipment, and $45,000.

d 2014 petitioners reported no gross receipts on their Schedules C for petitioner husband's investment management business. On their Schedules C petitioners claimed deductions for the following: Deduction Tax year 2013 Tax year 2014 Depreciation and sec. 179 expense deduction $12,920 $22,887 Insurance (other than health) 1,874 2,099 Interest (other) 3,361 3,618 Repairs and maintenance 11,053 8,594 Taxes and licenses 1,411 1,320 Aviation fuel 1,226 1,714 Hangar airport -0- 709 Total 31,845 40,941

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

6593-07: Petitioner con- cedes that it is not entitled to claim deductions for personal expenses in the amounts of$32,871, $57,128, $37,389, and $99,556, for 2002-2005, respectively; that it is not entitled to claim deductions under section 179 for qualified asset purchases in the amounts of$4,977, $24,912, $130,638, and $294,304, for 2002- 2005, respectively; and that it is entitled to claim depreciation deductions in the amounts of$249, $6,874, $15,638, and $113,967, for 2002-2005, respectivel

These expenses consisted of $1,029 for car and truck expenses; $855 for depreciation and a section 179 expense deduction; $759 for nonmortgage interest; $9,639 for rent or lease of business property other than vehicles, machinery, and equipment; $307 for supplies; $1,029 for taxes and licenses; $1,128 for deductible meals and entertainment; $3,467 for utilities; and $696 for other expenses consisting of$569 for business gifts and $127 fo

6654(a) 2011 $12,341 $2,075 $1,614 $176 2012 4,939 135 63 -0- After concessions,2 the issues for decision are whether petitioner for 2011 is entitled to deductions for contract labor, depreciation and section 179 expense, and repair and maintenance expenses for certain vehicles.

, petitioners reported income and expenses on the Schedules C relating to Hope as follows: Item 2011 2012 2013 Income Gross receipts or sales $13,600 -0- -0- Gross income 13,600 -0- -0- Expenses Car and truck 13,845 $15,429 $21,640 Depreciation and sec. 179 3,299 6,869 1,249 Insurance -0- -0- 588 Legal and professional 1,450 450 1,800 Office 1,200 -0- -0- Rent or lease of other business property -0- 18,000 -0- Supplies -0- 395 -0- Meals and entertainment 600 -0- -0- Utilities 1,746 -0- -0- Other

Petitioners also claimed deductions for "Depreciation and section 179 expense" for 2010, 2011, and 2012.

The reported expenses were as follows: Expense Amount Advertising $23,097 Car and truck 558 Commissions and fees 10,146 Contract labor 3,815 Section 179/depreciation 34,809 Insurance 16,900 Interest 3,567 Legal and professional fees 1,096 Office supplies 4,763 Repairs and maintenance 6,788 Supplies 97,738 Taxes and licenses 2,055 Travel 28,250 Meals and entertainment 3,440 Utilities 4,097 Wages 149,451 Other 1,538 For 2007 they reported gross receipts of$331,315, returns and allowances

ule, petition- ers reported "Gross receipts or sales" and "Gross Income" of$24,065 and claimed total expenses of$29,480 (claimed 2014 Schedule C expenses). The claimed 2014 Schedule C expenses consisted ofthe following: Expense Amount Depreciation & sec. 179 $12,000 Insurance other than health 1,440 Rent/lease--other 4,560 Repairs & maintenance 2,450 Supplies 700 Taxes & licenses 50 Meals & entertainment 1,800 Utilities 1,280 Other--gas 5,200 "The claimed 2014 charitable gifts consisted ofclaime

Petitioners also claimed deductions for "Depreciation and section 179 expense" for 2010, 2011, and 2012.

The three largest expenses reported were a depreciation and section 179 expense deduction not claimed elsewhere (depreciation) of$860,438, labor hired of$763,339, and feed of$361,093.

For each year they reported business expenses, including car and truck expenses, contract labor expenses, depreciation and section 179 expenses, legal and professional services expenses, supplies expenses, taxes and licenses expenses, travel expenses, meals and entertainment expenses, and utilities expenses.

and maintenance 950 650 Rent and lease--other business property 18,900 21,280 Rent and lease--vehicles, machinery, and equipment 5,607 4,856 Office 950 --- Legal and professional fees 2,531 757 Insurance other than health 1,008 --- Depreciation and sec. 179 18,042 --- Contract labor 2,400 2,760 Car and truck 3,097 3,211 Advertising 2,750 300 Meals and entertainment 4,912 688 Total 74,260 37,319 Petitioner also seeks $4,250 in deductions for depreciation and section 179 expenses for 2011 which we

Kilpatrick did not claim any depreciation deductions or make a section 179 election on his 2009 tax return.

urns. Petitioners reported income and expenses on the Schedules C relating to petitioner's book writing activity, as follows: - 8 - Item 2006 2007 2008 Income: Gross receipts or sales -0- -0- $479 Gross income -0- -0- 479 Expenses: Depreciation and sec. 179 $2,200 -0- -0- Legal and professional 150 -0- 750 Office -0- -0- 296 Rent or lease ofvehicles, machinery, and equipment 1,334 $2,819 2,014 Supplies -0- 625 -0- Meals and entertainment 2,913 2,494 1,371 Other¹ 15,300 26,033 16,205 Total 21,897

02.00 8,602.00 Utilities 1,219.00 1,277.00 Meals and entertainment 2,634.00 3,450.00 Travel 1,363.00 2,893.00 Rent/lease (other business property) 27,600.00 27,600.00 Office 8,763.00 9,354.00 Insurance (not health) 3,600.00 4,200.00 Depreciation and sec. 179 2,339.00 3,853.00 Contract labor 5,325.00 5,635.00 Advertising 2,092.00 3,300.00 Car and truck --- 13,769.51 Gross receipts/sales 8,000.00 --- In the notice ofdeficiency respondent made adjustments to non-Schedule C income, deductions, and c

butions; minus (4) distributions of$359,860; equals (5) stock basis of$11,627 before non- deductible expenses and depletion; minus (6) nondeductible expenses of$11,418; equals (7) stock basis of$209 before allowable losses and deductions; minus (8) sec. 179 deduction of$8,006 and charitable contribution deduction of$11,686; equals (9) a stock basis ofzero. - 17 - [*17] distributions in excess ofthat basis were made to Mr. Power from Power Realty for any ofthe taxable years 2007-11. Section 1366(

- 30 - [*30] Petitioners contend that they are entitled to a section 179 expense deduction of$31,380 with respect to the equipmentreceived.

- 5 - Expense Amount Business use ofhome $8,647 Repairs and maintenance 3,997 Legal and professional services 8,761 Insurance (other than health insurance) 2,431 Other 47,554 Depreciation and section 179 9,064 Car and truck 8,073 Total 88,527 Mr.

2009 and 2010 Federal income tax returns: Expense 2009 2010 Taxes and licenses $840 $255 Supplies 380 110 - 5 - Repairs and maintenance 4,400 -0- Office 770 650 Interest-mortgage 6,500 5,090 Insurance (other than health) 1,200 -0- Depreciation and sec. 179 2,947 9,990 Advertising 980 1,200 Car and truck 10,574 8,133 Business use ofthe home 4,588 12,190 Meals and entertainment 8,800 -0- Utilities 2,200 1,050 Travel 2,450 1,500 Legal and professional services -0- 180 Commissions and fees -0- 420

Other significant expenses were section 179 depreciation expenses for the horses and mortality insurance for the horses.

Sodipo claimed in his 2005 Schedule C-2 (2005 Schedule C-2 expenses) consisted ofthe following: Experise Amount Car and truck $15,222 Depreciation and section 179 721 Supplies 12,628 Taxes and licenses 315 Travel 4,000 Deductible meals and entertainment 600 Other 27,068 Total 60,554 - 7 - [*7] Newcare Developer, a C corporation, did not file Form 1120, U.S.

The Shahs reported atotal of$28,248 in expenses on Schedule C for 2009 and $33,780 in expenses for 2010 for the following: car and truck, travel, meals and entertainment, advertising, utilities, interest, legal and - 7 - [*7] professional services, commissions and fees, supplies, taxes and licenses, other, and depreciation and section 179.2 The Shahs grouped all ofthe Schedule C expenses together.

The Shahs reported atotal of$28,248 in expenses on Schedule C for 2009 and $33,780 in expenses for 2010 for the following: car and truck, travel, meals and entertainment, advertising, utilities, interest, legal and - 7 - [*7] professional services, commissions and fees, supplies, taxes and licenses, other, and depreciation and section 179.2 The Shahs grouped all ofthe Schedule C expenses together.

On a Schedule C, Profit or Loss From Business, attached to the signed 2008 Form 1040, petitioner claimed a deduction of$11,433 for various expenses relating to her freelance graphic design business, including car and truck expenses, depreciation and section 179 expenses, office expenses, repairs and maintenance expenses, supplies expenses, and expenses related to travel, meals, and entertainment.

However, petitioner failed to present evidence sufficient to substantiate his entitlement to any section 167 depreciation or section 179 accelerated depreciation deductions.

On a Schedule C, Profit or Loss From Business, attached to the signed 2008 Form 1040, petitioner claimed a deduction of$11,433 for various expenses relating to her freelance graphic design business, including car and truck expenses, depreciation and section 179 expenses, office expenses, repairs and maintenance expenses, supplies expenses, and expenses related to travel, meals, and entertainment.

n that claimed by petitioner. Further, for 2010 the IRS allowed petitioner an added deduction of$1,040 for taxes and licenses, and for 2011 the IRS allowed a nonclaimed deduction of$95 for utilities expenses. [*4] Expense 2010 2011 Depreciation and sec. 179 $1,188 --- Interest--other . 2,109 $4,558 Legal and professional services 3,457 3,097 Repairs and maintenance 2,339 253 Supplies 8,012 852 Taxes and licen es 105 2,010 Travel 2,823 --- Utilities 1,156 --- Other --- ¹61,308 ¹Petition r's other

On his 2006 Schedule C petitionerreported as expenses ofhis lawpractice depreciation and section 179 expense of$74,368 relating to his airplane and other airplane-related expenses of$41,252.

On his 2006 Schedule C petitionerreported as expenses ofhis lawpractice depreciation and section 179 expense of$74,368 relating to his airplane and other airplane-related expenses of$41,252.

The reported business expenses include: business use of home, supplies expenses, office expenses, legal and professional expenses, advertising expenses, travel expenses, car and truck expenses, other expenses, contract labor expenses, depreciation and section 179 expenses, and commissions and fees exp nses.

rrent expense. See sec. 168(e)(3)(B)(iv), (i)(2)(B). However, in disallowing the laptop expense as a current deduction, respondent does not take a position with respect to sec. li79. See sec. 179(a), (c) (requiring an affirmative election to expense sec. 179 property). - 36 - [*36] taxpayermeets patients, clients, or customers within the course ofthe taxpayer's business. Secs. 280F(d)(4)(B), 280A(c)(1)(A) and (B). Petitioner has not shown that he used the laptop exclusively in his home office or

However, petitioner failed to present evidence sufficient to substantiate his entitlement to any section 167 depreciation or section 179 accelerated depreciation deductions.

Close each had distributive shares ofordinary income, section 179 expense, and other deductions of$373,573, $50,000, and $327, respectively, for 2003.7 6Form 4797, Sales ofBusiness Property, ofthe 2003 partnership return reported timber sales of$2,045,562, cost or other basis of$1,229,091, and ordinary gain of$816,471, which was included in calculating the partnership's total and ordinary income of$74

179(f)(8)(B); sec. 1.170A-13(f)(2), Income Tax Regs. Section 170(f)(17) provides: "No deduction shall be allowed under subsection (a) for any contribution ofa cash, check, or other moñetary gift unless the donor maintains as a record ofsuch contribution a bank record or a written communication from the donee showing the name ofthe donee organi

Depreciation and Section 179 Expensing Mr.

179(f)(8)(B); sec. 1.170A-13(f)(2), Income Tax Regs. Section 170(f)(17) provides: "No deduction shall be allowed under subsection (a) for any contribution ofa cash, check, or other moñetary gift unless the donor maintains as a record ofsuch contribution a bank record or a written communication from the donee showing the name ofthe donee organi

1,664 -0- -0- Repairs and maintenance 5,247 9,315 -0- Rent/lease--vehicles/ machinery 5,503 5,442 -0- Office expenses 9,110 7,926 -0- Legal and professional services 18,937 22,375 12,446 Insurance (other than health) 1,915 4,223 -0- Depreciation and sec. 179 expense 40 -0- -0- Car and truck expense 6,175 7,539 12,812 In addition, respondent disallowed an $88,787 NOL carryover deduction that petitioners claimed on their 2007 income tax return. Respondent conceded that some ofthe documentation off

007 Douglas & Jenkins claimed Schedule C ex- penses). The 2007 Douglas & Jenkins claimed Schedule C expenses consisted of the following: - 10 - [*10] Expense Amount Advertising $350 Car and truck expenses 6,637 Contract labor 4,000 Depreciation and sec. 179 expense deduction 1,137 Interest 4,687 Repairs and maintenance 895 Supplies 6,334 Taxes and licenses 2,400 Utilities 14..407 Total 40,847 The 2007 Douglas & Jenkins claimed Schedule C expenses are not equal to 50 percent ofthe "Total deductio

1,664 -0- -0- Repairs and maintenance 5,247 9,315 -0- Rent/lease--vehicles/ machinery 5,503 5,442 -0- Office expenses 9,110 7,926 -0- Legal and professional services 18,937 22,375 12,446 Insurance (other than health) 1,915 4,223 -0- Depreciation and sec. 179 expense 40 -0- -0- Car and truck expense 6,175 7,539 12,812 In addition, respondent disallowed an $88,787 NOL carryover deduction that petitioners claimed on their 2007 income tax return. Respondent conceded that some ofthe documentation off

1,664 -0- -0- Repairs and maintenance 5,247 9,315 -0- Rent/lease--vehicles/ machinery 5,503 5,442 -0- Office expenses 9,110 7,926 -0- Legal and professional services 18,937 22,375 12,446 Insurance (other than health) 1,915 4,223 -0- Depreciation and sec. 179 expense 40 -0- -0- Car and truck expense 6,175 7,539 12,812 In addition, respondent disallowed an $88,787 NOL carryover deduction that petitioners claimed on their 2007 income tax return. Respondent conceded that some ofthe documentation off

ners' deductions for interest expense by $669 and $340 for 2008 and 2009, respectively; (9) respondent properly disallowed a deduction for repairs and maintenance of$5,561 for 2007; (10) respondent properly disallowed deductions for depreciation and sec. 179 expenses of$5,573, $288, $8,664, and $2,690 for 2006, 2007, 2008, and 2009, respectively; (11) petitioners' travel expense deduction for 2005 should be allowed; and (12) respondent properly disallowed petitioners' travel expense deduction of

ereon were reported using the cash basis method ofaccounting as follows: Income: Gross receipts or sales $92,956 Cost ofgood sold - 0 - Returns and allowances 1,008 Gross income 91,948 Expenses: Advertising 1,993 Car and truck 5,959 Depreciation and section 179 57 Insurance (other than health) 539 Interest (other) 6,647 Legal and professional services 3,258 Office 213 Rent or lease ofother business property 15,000 Supplies 43,182 Taxes and licenses 4,779 Utilities 10,172 Other expenses 149 Total

g $441,124 and claimed the following expenses to- taling $423,182 (2007 claimed Schedule C expenses): 3Ms. Canatella is petitioner in the case at docketNo. 8821-13. - 4 - [*4] Expense Amount Advertising $8,647 Contract labor 87,345 Depreciation and sec. 179 expense deduction 8,025 Office expense 24,326 Rent or lease 18,000 Repairs and maintenance 7,275 Travel, meals, and entertainment 11,792 Other expenses 257,772 Total 423,182 At a time not established by the record, respondent commenced an exa

,117 3,570 2,987 Rent/lease--other business property 12,000 --- 12,000 Business use ofhome 5,084 20,696 2,686 Legal and professional services 11,200 --- --- Interest--other 14,400 --- --- Meals and entertainment 19,200 35,800 36,640 Depreciation and sec. 179 24,439 34,094 1,675 Total 142,800 122,180 107,023 On their 2006 Schedule D, Capital Gains and Losses, petitioners reported a $172,000 net long-term capital loss with respect to a "real estate office", which, 6Petitioners combined the busines

179(f)(8)(B); sec. 1.170A-13(f)(2), Income Tax Regs. Section 170(f)(17) provides: "No deduction shall be allowed under subsection (a) for any contribution ofa cash, check, or other moñetary gift unless the donor maintains as a record ofsuch contribution a bank record or a written communication from the donee showing the name ofthe donee organi

The adjustment for 2006 reducedthe allowable amount ofthe section 179 expense deduction because ofreduced business use.

r to a $116,667 amortization deduction; (3) Malibu is entitled to a $6,261 deduction for equipment expenses, a $4,500 deduction for the purchase ofa truck, a $2,250 deduction for legal and professional expenses, and a $3,983 deduction for additional sec. 179 depreciation expenses; (4) Malibu is not entitled to an additional $500 deduction for the purchase ofa truck nor to a $116,667 (continued...) - 3 - [*3] remaining issue before the Court is whetherpetitioners are liable for the section 6662(a

of$61,009, resulting in a net loss of$45,757. The reported expenses consist ofthe following: Expense Amount Travel $575 Car and truck 36,640 Business use ofhome 674 Repairs and maintenance 1,550 Rent/lease equipment 500 Office 3,300 Depreciation and sec. 179 1,570 Contract labor 12,500 Advertising 2,500 Uniforms 1,200 Total 61,009 - 6 - III. Trial Proceedings A. Ms. Hernandez's Absence Although Ms. Hernandez appeared at the calendar call for the trial session, she did not appear when the case wa

The issues remaining for consideration are: (1) whether petitioner may deduct car and truck expenses; (2) whether petitioner may deduct lodging expenses; (3) whether petitioner may deduct meal expenses; (4) whether petitioner may deduct section 179 expenses; and (5) whetherpetitioner is liable for the accuracy-related penalty under section 6662(a).

A pattern was found in which section 179 deductions were claimed for fictitious vehicle purchases.

He did not report gross receipts for the Schedule C activity, but he claimed expense deductions totaling $11,609 for depreciation and section 179 expenses, meals and entertainment, and "other expenses".

a Schedule C2. - 5 - [*5] I. Schedule Cl--Gorokhovsky Imports On petitioner's 2006 and 2007 Schedules Cl, he claimed depreciation and cost ofgoods sold deductions for his import business in the following amounts: Item . . 2006 2007 Depreciation and sec. 179 expense deduction $807 $527 Cost ofgoods sold 7,000 7,336 Respondent disallowed all petitioner's claimed deductions. II. Schedule C2--Petitioner's Law Practice In connection with his law practice, petitioner claimed a $139,199 business expens

LLC (LTG). The Schedule C identified Ms. Caraman as the proprietor ofLTG, reported gross'receipts of$600, and claimed a deduction of$102,567 for various expenses listedbelow: Expense Amount Supplies . . $360- Legal/professional 650 Depreciation and.sec. 179 2,084 Business use ofhome 8,446 Other 5,954 Utilities 6,812 Meals and entertainment 2,260 Repairs and maintenance 5,750 Insurance (other than health) 6,583 Commissions and fees 14,375 Advertising 12,000 Travel 17,062 Car and truck 20,231 Tot

After concessions, the issues for decision are v hether petitioner must recapture depreciation claimed for 2006 in relation to a Hummer vehicle, whether he is entitled to a section 179 deduction relating to a restaurant business, whether he is entitled to rental expense deductions, and whether he is liable for the accuracy-relatedpenalty.

After concessions by the parties,2 the issues for decision are: (1) whether petitioners may depreciate and deduct section 179 expenses for a Mercedes-Benz (MB) 450 GL automobile purchased in October 2009; (2) whether petitioners may deduct losses from their rental real estate activities under the passive activity loss rules in section 469; and (3).whether petitioners are liable for accuracy-related penalties under section 6662(a).

the aircraft exceeds 50%, section 280F(b)(1) is satisfied, and the taxpayer may be entitled to deduct depreciation under section 168(a), additional first-year deprecation (bonus depreciation)under section 168(k)(1), and any deduction allowable under section 179. See also sec. 280F(b)(1), (d)(1), (6). To the extent the taxpayer's qualified business use ofthe aircraft is 50% or less, section 280F(b)(1) is not satisfied, and the taxpayermust use the general depreciation method ofsection 168(b)(1) (

-4- [*4] Expenses: Car and truck 12,991 Depreciation and section 179 720 Legal and professional services 5,102 Office 1,700 Rent or lease ofother business property 18,000 Repairs and maintenance 8,530 Supplies 400 Travel 850 Deductible meals and entertainment 50 Other' 5,500 Total 53,843 Net profit 157 1This deduction includes: (1) $700 for license fees, and (2) $4,800 for towing.

Depreciation In the notice ofdeficiency respondent allowed the reported expenses for petitioner's laundromat business for 2005 and 2006 and.allowed the following expenses for 2007 and 2008: Expense 2007 2008 Other $31,580 $5,458.00 Depreciation and sec. 179 10,457 871.42 Petitioner failed to address in his opening briefthe issue ofwhether he was entitled to deduct additional expenses for 2007 and 2008 with respect to his laundromat business. We, therefore, deem these issues to be conceded or ab

-10- [*10] Austin Otology elected to deduct a portion ofthe RV's purchase price under section 179 and began depreciating the remaining balance on its 2008 return.

It also disallowed all or some ofthe following claimed Schedule C expense deductions: advertising, car and truck, contract labor, - 6 - [*6] depreciation and section 179, mortgage interest, utilities, wages, and other expenses.4 The IRS also determined that while petitioners resided at the Butler property only 33% ofthe property was used for Mr.

ional. 3The adjustments in this category correspond to the following lines in the notice ofdeficiency: "SelfEmploymentTax" (for all three years), "Addnl Child Tax Credit" (for all three years), "Depreciation" (for all three years), "Depreciation and Sec. 179 Expense" (for 2006 and 2007), "Itemized Deductions" (for all three years), "Exemptions" (for 2006 and 2008), "Additional Taxes / Alternative Minimum Tax" (for 2008), "Qualified dividends" (for 2008), and "Capital Gain or Loss" (for 2008). So

72,848 and total expenses of$66,016.6 Petitioners' 6Petitioners reportedthe following expenses on their 2006 Schedule C: Expense Amount Automobile $913 Travel 3,021 Meals & entertainment 609 Business use ofhome 7,920 Advertising 127 Depreciation and sec. 179 1,350 Employee benefits 4,990 (continued...) - 11 - [*11] Schedule C gross receipts consisted of$3,644 in self-employmentincome received by the Law Offices ofIsidoro Rodriguez from the law offices' nonlitigation clients; $59,220 ofincome as

On his 2006 individual income tax return, petitioner claimed a net loss in connection with the micro-utility sales activity of$12,217, which was primarily the result ofa section 179 expense deduction for the investment system purchased - 5 - in 2006.

Bailey does not claim any expense deduction therefor under section 179, nor does he show or allege that he elected such treatment.

t Depreciation and Section 179 Expenses Petitioners claimed depreciation and section 179 deductions on the 2006-08 Schedules C for the consulting business (totaling $1,317), the 2006-08 Schedules C for the textile business (totaling $6,522), on the 2006-07 Schedules C for Big Mall (totaling $7,256), and on the 2007-08 Schedules C for the staffing business (totaling $

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 .

tached to his tax returns petitioner reported the following business expenses relating to his side activity: Expense 2008 2009 , Advertising . $654 $936 Car and truck 14,833 11,560 Commissions and fees 633 330 Contract labor 1,339 1,785 Depreciation/sec. 179 12,207 · . 88 Insurance 1,224 1,720 Interest--other 3,192 5,030 Legal and professional 1,500 2,749 Office 900 (cid:16)042 4,953 Rental ofvehicle and machinery 345 438 . Rental ofother business property 120 1,878 Travel, meals, and entertainm

6,536 for other expenses. Petitioners also concede that they are not entitled to the following deductions claimed for 2008: (1) $30,959 for home mortgage interest claimed on their Schedule A, Itemized Deductions; and (2) $12,508 for depreciation and sec. 179 expense claimed on their Schedule C. - 3 - Background Some ofthe facts have been stipulated, and they are so found. We incorporate by reference the parties' stipulation ofsettled issues, stipulation of facts, supplemental stipulation offacts

* * * A new theory which merely clarifies or develops the original determination is not a new matter in respect ofwhich respondent bears the burden ofproof."); see also Shea v.

es in petitioners' respective 2006 and 2007 Federal income taxes, plus accuracy- related penalties under section 6662(a).1 After concession ofsome issues, the issues for decision are: (1) for purposes ofrecapture and current expense deductions under section 179 and depreciation under section 167 relating to a Cessna 182 airplane, the extentto which petitioners have substantiated their business use ofthe airplane; (2) whether petitioners have substantiated their business use ofvarious other asset

e record in this case is incomplete in that there are certain pages missing from the copy ofthat return. 4The record does not establish whether a paid preparer prepared and signed petitioners' 2008 return. - 7 - [*7] Expense Amount Depreciation and sec. 179 expense deduction $1,120 Insurance 1,383 Interest 6,100 Repairs and maintenance 9,535 Other 6,984 Total 25,122 In the 2007 Schedule E, petitioners reported a nonpassive loss of$15,039 (2007 claimed Schedule E loss) from PIC. That loss was sho

-- 10,584 And these are the particular items being disputed: (cid:16)042 net operating loss (NOL) carryovers claimed for 1998-2003; (cid:16)042 SEC's business losses for 1998-2002; (cid:16)042 office expenses deducted for 2002 and 2003; (cid:16)042 section 179 deduction for 2003; (cid:16)042 unreported rental income for 2002 and 2003; (cid:16)042 capital gain and losses for 2001 and 2002; (cid:16)042 additions to tax under section 6651(a)(1) for 1998-2003; (cid:16)042 additions to tax under sect

entitled to a loss. We therefore limit our inquiry to whether petitioner has shown entitlementto deduct amounts in excess ofthose he 3Petitioner, during the litigation process, submitted a Form 4562, Depreciation and Amortization, seeking to make a sec. 179 election to expense $6,000 in capital expenditures. Petitioner's election is untimely, and the expenditures are unsubstantiated.. We, accordingly, give no consideration to that aspect ofthe controversy. - 6 - originally reported.4 After revie

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 .

On Schedule C petitioner reported $6,000 in gross receipts or sales from consulting and deductions of$5,18 for mileage expenses and $2,600 for depreciation and section 179 expenses, le ding to a loss of$1,780.5 The Court concludes from the record that the unreimbursed employee expense deductions claimed on Schedule A related to Mr.

Bailey does not claim any expense deduction therefor under section 179, nor does he show or allege that he elected such treatment.

The following deductions are claimed on the Schedules C: - 10 - Deduction 2003 2004 2005 Car and truck expenses $10,019 $14,091 $8,330 Depreciation and section 179 expense , 25,340 17,816 .

on Schedule C, Profit or Loss From Business, were disallowed; (3) the amount ofgross receipts on Schedule C was decreased by $3,200 and the amount ofwages was increased by $3,200 for the taxable year 2006; (4) petitioner's net operating losses and section 179 expenses claimed on Schedule E, Supplemental Income and Loss, were disallowed; (5) $2,990 and $10,190 ofpetitioner's claimed charitable contribution deductions were disallowed for the taxable years 2005 and 2006, respectively; and (6) peti

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 .

In that notice, respondent determined, inter alia, that petitioner has (1) respective increases in taxable income reported in his 2005 Schedule E and his 2006 Schedule E of$455,33.1 and $317,413.40 and (2) respective decreases in "Section 179 expense" deductions claimed in his 2005 Schedule E and his 2006 Schedule E of$60,916 and $66,896.

In a notice of deficiency, respondent determined, inter alia, that petitioners were not entitled to: (1) Depreciation and section 179 expenses of $2, 034 related to the campground vehicles and the mobile home; (2) insurance other than health of $380 related to the campground vehicles and mobile home; (3) mortgage interest of $2,816 related to the mobile home; (4) - 5 - utilities of $2 258 for the m bile home; and (5) .vehicle expenses of $2, 098 for fuel for the vañi

In calculating that 2004 Schedule C loss, petitioners claiméd, inter alia, coåt of goods sold -of $6, 622 *and deprecia- tion 'and section 179 expense*of $39,115.

On Schedule C, petitioners made the following expense claims: Schedule C Expense Amount Automobile $3,396 Section 179 property 323 Legal & professional services 4,075 Office 100 Rent or lease of vehicles, 60 machinery, & equipment Supplies 511 Taxes & licenses 150 Travel 7,208 Meals & entertainment 1,324 Utilities 1,367 Other 404 Petitioners attached a Form 8829, Expenses for Business Use of Your Home, to their 2007 Federal income tax return.

Petitioner cannot, however, reap an immediate deduction for his tractor under section 179 because he failed to elect that treatment.

r. Bell, respectively, during 2003. 'The net income of $187,234 from Today I Can that the Bells reported in the 2003 joint return consisted of the difference between ordinary income from trade or business activities of $207,028 and a deduction under sec. 179 of $19,794. 7The $5,848 withholding tax credit that the Bells claimed in the 2003 joint return consisted of $2,320.41 and $3,527.62, respectively, that Today I Can withheld from the respective wages that it paid petitioner and Mr. Bell durin

As relevant here, the Schedule A includes a $2,031 deduction for charitable contributions, and the Schedule C includes the following deductions: Expense Amount Car and truck $18,303 Depreciation and section 179 4,400 Insurance (other than health) 3,247 Legal and professional services 6,650 Office.

On May 8, 2007, a Form 4605, Examination Changes-- Partnerships, Fiduciaries, Small Business Corporations, and Interest Charge Domestic International Sales Corporations, was executed by petitioner's son as JAM's majority shareholder accepting the IRS examiner's adjustments to JAM's income, property distributions other than dividends, section 179 expense deductions, and charitable contributions, among others.

respect to intangible assets, the Internal Revenue Code generally uses the word "amortization". See, e.g., sec. 197, I.R.C. Petitioner claimed depreciation and amortization expenses in two categories on his 2003 Schedule C: (1) The depreciation and sec. 179, I.R.C., expense deduction category, and (2) the amortization expense deduction category. Only the latter category is at issue. For simplicity, we shall hereinafter refer to the disputed category as the cost recovery deduction. - 3 - claimed

During the examination of petitioners' 2005 return, petitioners first raised thesissue that they are entitled to a $25, 000 section 179 expense dedoction and a $1, 099 depreciation deduction for the BMW in lieu of the deduction claimed on their return.

Credits, etc., which reported Mr. Olmstead's share of current year income, deductions, credits, and-other items as follows: Iteml Amount Ordinary business income $62,763 Interest income 7,196 Net long-term capital gain 1,231 Net sec. 1231 loss 329 Sec. 179 deduction 497 Other deductions 107 1The Schedule K-1 also reported alternative minimum tax items and items affecting Mr. Olmstead's basis. Petitioners did.not r.eport anyzof the foregoing items on their 2007 joint Federal income tax return (2

Car and truck 18,503 3,224 commissions and fees (professional organizations and continuing legal education)1 922 874 Contract labor 1, 687 1, 644 Depreciation and section 179 54 1,693 Insurance (automobile insurance and home insurance) 3, 865 3, 944 Interest ' 18, 985 18, 466 Office .

Petitioner's Schedule C reflected the following deductions: Description Amount Claimed Depreciation and section 179 expense $3,800 deduction Insurance 3,500 Legal and professional services 2,800 Rent or lease (vehicles, machinery, and 5,100 equipment) Supplies 125,000 Deductible meals and entertainment 275 Wages 135,000 4Mr.

A closer look at petitioners' treatment of particular items only makes matters more confusing : For example, William Holdner deducted 11 .4 percent of Holdner .Farms' depreciation and section 179 expenses in 2004, 79 .4 percent in 2005, and 47 .2 percent in 2006 .

As petitioner points out : "the operation of section 171 TCGA and section 179 TCGA is substantively similar to the gain deferral and recognition rules relating to intercompany transfers in our consolidated return regulations, section 1 .1502-13, Income Tax Regs ." Petitioner argues, however, that "[t]he Windfall Tax statute was not designed on the basis of Section 179 TCGA .

The disallowed Schedule C expenses comprised the following items: Expense Amount Car and truck expenses 1$10,230 Commissions and fees 99,369 Depreciation and section 179 16,082 Office expenses ,.

or of Closets and ,Closets, Inc., during the 2002, 2003, .and 2004 tax years. Unless otherwise noted, all values have been rounded to the nearest whole dollar amount. *For the tax years 2002, 2003, and 2004 petitioner has - conceded depreciation and sec. 179, I.R.C.," expense adjustments of negative $1,800, $14,400, and $17,400, respectively, claimed on Schedules C, Profit or Loss From Business, of her Forms 1040, U.S. Individual Income Tax Return. Respondent has conceded that - the unexplained

In those forms, Vlock and Hammond claimed the following depreciation deductions and section 179 expenses with respect to, inter alia, petitioners' residence, certain of the personal residence ex- penses, the 1996 Lexus automobile, the 1999 Lexus automobile, and the 1999 Suburban automobile : - 41 Amount Claimed for the Taxable Year Ended Description 11/30/03 11/30/04 11/30/05 Section 179 expense deduction 1$22,975 -- 2$2,960 MACR

chedule A, Itemized Deductions, and the following deductions claimed on Schedule C, Profit or Loss From Business : $7,787 (car and truck expenses), $2,106 (travel expenses), $3,257 (legal and professional services expenses), $5,250 (depreciation and section 179 expenses), $2,559 (office expense), $500 (repairs and maintenance expenses), $1,200 (taxes and license expenses), $1,849 (telephone expenses) $90 (bank charges), $593 (dry cleaning expenses) and $455 (DSL expenses) .

rico closed J&A's operations. Further, on January 1, 2005, D'Errico sold 100 percent of the shares of both D&W and D&M to an unrelated third party. II. TPM In his notice of deficiency, respondent denied TPM the following deductions: Expense Amount Sec. 179 expense $102,000 Depreciation 7,130 Airplane expenses 11,287 Auto expenses 5,143 Meals & entertainment 1,257 Travel 4,581 Repairs & maintenance 1,.790 Supplies 3,233 Rent 30,000 Total 166,421 In December 2004 TPM purchased a 2001 Cessna 172S a

On their 2005 Schedule E, petitioners claimed a $27,249 passthrough section 179 deduction from Daniel .

at «Consulting Received, Paid, or Clained as Depreciation The following chart summarizes certain amounts that Consult- ing received, paid, or clained as depreciation (discussed belon) :" "The amount listed belòw as ."Depreciation claimed" includes a sec. 179 expense. - 53 - Taxable Year Ended Mar. 31 Amounts Received 2004 2005 2006 Transfer's payments to Consulting ' $45,500.00 $38,500.00 $42,000.00 Leasing's payments to Consulting 18,000.00 13,000.00 9,000.00 Total amounts received by Consultin

If petitionerllhad filed a tax return for 2004, she might have elected under section 179 t o deduct, rather-than depreciate, the cost of'i,equipment purchased and placed in service that year .

For example,' if petitioner had filed a return for 2005, he might have elected under section 179 to deduct, .

e stock of a group member holding an appreciated asset would not trigger any capital gains charge to the trans-feror. (The nongroup transferee, meanwhile, would receive a basis in the stock that would reflect the value of the underlying asset.) TCGA sec. 179 was enacted to make the tax consequences of the stock transfer similar to those of the asset transfer, although only if the transfer of the stock of the group member holding the asset occurred within 6 years of that member’s acquisition of t

11,37 9 In a stipulation of facts the parties agree that petitioners are .entitl.ed to deduct on Schedule C, Profit or Loss From Business, the following depreciation and section 179 expenses (and that these amounts were included in,the amounts.

"A taxpayer may elect to treat the cost of any section 179 property as an expense which is not chargeable to capital account .

; Additionally, after reading about the new tax law benefit for SUVs in the news, petitioner provided the return preparer the cost of the Cadillac Escalade as a 2003 deduction under section 179 even though petitioner and intervenor had purchased the SUV in August 2002 and placed it in service in that year .

lowed . 12 - C. Cost of Goods Sold and Other Schedule C Expense s On his 2004 Schedule C petitioner did not report any amount as cost of goods sold (COGS)-or claim a, deduction for any business expense other than a $5,810 depreciation expense under section 179 . In the notice of deficiency respondent determined that petitioner incurred $25,177 for COGS, $2,739 for insurance, and $322 for repairs and maintenance in 2004 . Petitioner submitted evidence showing that he had additional Schedule C exp

We are satisfied that the kennel petitioner had constructed in his backyard for his police dog was not a building as defined in section 1250 but rather was depreciable personal .

Respondent did not assert a-claim under section 6214(a) for the increased deficiency that will result from the disallowance of petitioners' claimed deductions for section 179 expenses and section-280A expenses for the business use of their home pursuant to sections 179 (b) (3) (A) and 280A(c) (5) .

The Appeals officer handling the Atchisons' case computed their future income by using their actual income in 2005 : 2 Section 179 allows a taxpayer in some circumstances to deduct the entire cost of a capital asset in the year in which he puts it into service, rather than depreciating the cost over time .

- 5 - On the Schedule C petitioners claimed a $2,760 deduction for vehicle expenses, a $30,366 deduction .for depreciation and section 179 expense, a $250 deduction for legal and professional services, a $501 deduction for supplies, and a $990 deduction fo r other expenses .' 2 .

We are satisfied that the kennel petitioner had constructed in his backyard for his police dog was not a building as defined in section 1250 but rather was depreciable personal .

- On audit, for lack of substantiation respondent removed from the computation of petitioners' taxable income for 2002 and 2003 -5- the above reported income, section 179 expense, and nonpassive ordinary loss item's relating to HM .

The remaining issues' for decision are whether petitioners are entitled to deductions for section 179 expenses with respect to a vehicle (Ford F-250), automobile insurance, vehicle license fees, and gasoline, fuel, and oil and whether petitioners are liable for the accuracy-related penalty under section 6662(a) .

The TCO prepared a "corrected report", lowering the - 5 - adjustments for Schedule C "Other Expenses", Schedule C depreciation and section 179 expenses, and self-employment tax .

274(n) reduction) Utilities 1,689 Business use of home 2,09 6 The depreciation/section 179 deduction includes $1,843 identified by petitioners as the cost of a computer .

wed Schedule C expenses comprised the following items : Expense 2003 2004 Wages $24,800 $4,200 Utilities 4,369 5,361 Supplies 120 5,38 0 Rent 1, 800 n/a Office expense 1,550 11 5 Legal/professional 853 47 5 Employee benefits 2,968 n/a Depreciation/sec. 179 2,011 (191 ) Contract labor 1,859 23,42 0 Car and truck 5,071 3,67 5 Advertising 265 88 5 Insurance n /a 1,138 Total 45,666 44,458 Petitioners submitted a timely petition, and trial was hel d on February 4, 2008 . OPINION I . Business Expense

00 and 2002 Federal income tax returns were tried by consent . Rule 41(b)(1) . After trial, respondent acknowledged that 13 .25 percent of petitioner's home qualifies as a home office and that expenses properly allocated thereto are deductible under section 179 . Respondent disallowed the $11,400 and the $11,000 in claimed carryback and carryforward losses relating to the legal fees petitioner incurred in 2001 . - 7 - The schedule below reflects by category for each year the total amounts of pet

, job search expenses , and medical and dental expenses claimed on Schedule A, Itemized Deductions; (2) whether petitioner is entitled to deductions of $6,410 for expenses related to pension and profit-sharing plans and $2,888 for depreciation and section 179 expenses, claimed on Schedule C, Profit or Loss From Business ; (3) whether the $18,312 in distributions that petitioner received from Wescom Credit Union is includable in his taxable income ; .(4) whether petitioner is liable,-for the 10-

The 2002 Schedule C expense deductions in dispute are the $2,345 of the claimed $6,182 in other expenses and $7,666 of the claimed $25,.668 in section 179 expenses and depreciatio n deductions that respondent disallowed .

After concessions by petitioners, the issues for decision are whether : (1) Petitioners substantiated depreciation and section 179 deductions totaling $21,986 and $9,731 claimed on Schedule C, Profit or Loss From Business, for 2003 and 2004, respectively, (2) whether petitioners substantiated Schedule C car and truck expense deductions in an amount greater than $7,127 for 2003 and greater than zero for 2004, and (3) whether petitioners substantiated deductions clai

The TCO prepared a "corrected report", lowering the - 5 - adjustments for Schedule C "Other Expenses", Schedule C depreciation and section 179 expenses, and self-employment tax .

The TCO prepared a "corrected report", lowering the - 5 - adjustments for Schedule C "Other Expenses" , chedule C depreciation and section 179 expenses, and s e f-employment tax .

Depreciable Assets A taxpayer may elect to deduct as a current expense the cost of any section 179 property, with certain dollar limitations, that is acquired for purchase in the active conduct of a trade or business and placed in service during the taxable year.

29(...continued) ation and section 179 expense deduction.” Although not alto- gether clear, we construe petitioner’s statement to mean that the only Schedule C deduction that he is claiming for 1999 is a depreciation deduction.

6662(a) 2003 $7,684 $1,536 .80 2004 4,451 890 .20 After concessions by petitioners, the sole remaining issue fo r decision is whether petitioners are entitled to a deduction under section 179 of $24,000 for 2003 .

On his Form 1040-SS, petitioner claimed the followin g deductions : Truck purchase (as a section 179 expense) $2,500 Insurance (other than health) 3,552 Legal and professional expenses 2,500 Other business property (as a section 280A'i 6,300 deduction for the business use of his residence ) Utilities (as a section 280A deduction for ; the 2,800 business use of his residence ) Repairs and maintenance 800 Supplies 1,000 Taxes and license

For the taxable year 2001, the notice disallowed claimed de ctions for $16,815 of depreciation and section 179 expense ; $4,031 of car and truck expense ; and $323 of interest expense .

Return of Partnership Income, for 2002, which reported a loss of $166,743 .2 Great American attached to its 2002 return a Form 4562, Depreciation and Amortization, that showed a tentative section 179 deduction of $21,028 .

Return of Partnership Income, for 2002, which reported a loss of $166,743 .2 Great American attached to its 2002 return a Form 4562, Depreciation and Amortization, that reported a tentative section 179 deduction of $21,028 .

In that schedule, petitioners claimed total expenses of $5,661 consisting of $2,496 for "Depreciation and section 179 expense deduction" with respect to a "RAM VAN" (Dodge van), $1,125 for "Insurance", and $2,040 for "Other expenses" .

Add lines 5 and 6 114,634 Expenses: 10 Car and truck expenses 2,340 $2,340 .00 $1,270 11 Commissions and fees 7,900 8,560.00 5,330 13 Depreciation and section 179 3,756 3,756 .00 1,430 expense deduction 18 Office expense -0- 667.59 267 20 Rent or lease a Vehicles, machinery, and equipment b Other business property 1,500 24,931.51 18,670 24 Travel, meals, and entertainment a Travel 33,288 10,208.49 2,450 b Meals and entertainment $5,000 $3,415.00 $1,760 c Enter nondeductible 2,500 1,707 .50 880 a

Flair Enterprises also claimed a $20,000 section 179 deduction for the taxable year 2000 related to the acquisition of a tractor and loader .

Cooper’s 2001 expenses for her horse barrel-racing activities were reported as follows: - 4 - Car and truck expenses $5,231 Depreciation and section 179 expense 1,268 Office expense 68 Repairs and maintenance 1,529 Travel 518 Meals and entertainment 101 Entry fees 2,261 Feed/hay 913 Vet/meds 2,513 Tack maintenance 2,053 Farrier 1,206 17,661 Petitioner failed to timely file a Federal income tax return for 2001.

ts in Arevalo. Thus, the Opinion in Arevalo is controlling. Background Some of the facts have been stipulated, and they are so found. The stipulation of facts and the attached exhibits are 1 The parties agree that petitioners were not entitled to a sec. 179 deduction for a candy box business petitioners operated during tax year 1999. The parties agree, however, that petitioners were entitled to a depreciation deduction of $1,549 for the candy box business in that same year. - 3 - incorporated by

The Schedule K-1 computed petitioner’s share of Edgington Mullins’ income, credits and deductions as if he was a 50-percent shareholder for the entire taxable year as follows: Ordinary income of $25,686, ordinary dividends of $100, and a section 179 expense deduction of $6,282.2 On his individual return for 2001, petitioner did not report any of the items of income or deductions from the Schedule K-1.

On her Schedule C, petitioner claimed as follows: Income Amount Gross receipts $750 Less: Cost of goods sold 4,449 Gross profit (3,699) Gross income (3,699) Expenses Advertising $25 Car and truck expenses 273 Depreciation and section 179 expense 181 Travel expenses 150 Utilities 394 - 11 - Other expenses: Show booth expenses 500 Bank fees 120 Security 6% 57 Pest control 6% 43 Total expenses $1,743 Net Business Loss $5,442 As part of her business expenses, petitioner claimed a truck and automobil

reciation deduction of $1,301 for the computer and software. Petitioner provided no evidence that he was entitled to a greater deduction than allowed by respondent, nor did he prove that he properly elected to expense the computer and software under section 179. Again, we sustain respondent. Contentions we have not addressed are irrelevant, moot, or without merit. Reviewed and adopted as the report of the Small Tax Case Division. Decision will be entered for respondent.

The Schedule C, which named petitioner as the proprietor of a business engaged in “information services”, listed the following gross receipts and deductions: Gross receipts -0- Car and truck expenses $4,606 Depreciation and section 179 expense 13,930 Employee benefit programs 7,897 Legal and professional services 6,379 Office expense 15,188 Supplies 2,936 Travel 9,443 Meals and entertainment 2,815 Utilities 3,706 Home office expense 22,169 Net loss (89,069) Taking into account the Schedule C los

tions; (3) whether petitioners are entitled to an ordinary loss under section 1244; and (4) whether petitioners are liable for the accuracy-related penalty under section 6662(a). 1 Petitioners concede that they are not entitled to a depreciation and sec. 179 expense deduction of $1,150 claimed on Schedule C, Profit or Loss From Business, for petitioner DeClerk. Petitioners further concede that they are not entitled to a deduction for an unreimbursed employee expense of $1,709 claimed on Schedule

Expenses included $165,625 in depreciation and section 179 expenses, $5,541 in interest paid, $153,308 in “1994 Sharecrop Board expenses”, and $51,162 in “Expense for the Cost Basis of Purchased Cattle that Died in 1994".

C expenses on her Federal income tax returns for the years at issue: Sch. C expense category 1987 1988 1989 1990 Advertising $98 $160 $513 $2,384 Bank charges 469 1,035 120 120 Car & truck 6,672 8,807 5,354 3,240 Collection fees -- -- 850 -- Deprec./sec. 179 2,546 11,974 2,444 1,467 Dues & pubs. 2,337 3,867 2,675 4,095 Employee benefits 2,057 2,243 5,274 3,998 Insurance 514 3,677 3,745 3,565 Interest 10,034 3,053 2,926 2,070 Legal & prof. 5,104 7,239 6,128 13,536 Rent 11,460 10,256 9,706 13,334

The loss comprised the following claimed expenses: (1) $2,007 for advertising; (2) $7,471 for car and truck expenses; (3) $24,944 for depreciation and section 179 expense deduction; (4) $1,960 for mortgage expenses; (5) $1,268 for travel; (6) $1,295 for meals and entertainment; and (7) $21,099 for other expenses.

Before the case went to trial, the parties fully stipulated the facts under Rule 122.2 Discussion Section 179(a) allows a taxpayer a deduction--in 1997, one of up to $18,000--for property (prosaically called “Section 179 property”) used in his trade or business that he must otherwise add to his capital account and depreciate.

C expenses on her Federal income tax returns for the years at issue: Sch. C expense category 1987 1988 1989 1990 Advertising $98 $160 $513 $2,384 Bank charges 469 1,035 120 120 Car & truck 6,672 8,807 5,354 3,240 Collection fees -- -- 850 -- Deprec./sec. 179 2,546 11,974 2,444 1,467 Dues & pubs. 2,337 3,867 2,675 4,095 Employee benefits 2,057 2,243 5,274 3,998 Insurance 514 3,677 3,745 3,565 Interest 10,034 3,053 2,926 2,070 Legal & prof. 5,104 7,239 6,128 13,536 Rent 11,460 10,256 9,706 13,334

itioner established that he spent the amounts claimed, supra, for a telephone, two cellular phones, two pagers, and a laptop computer, petitioner would not be entitled to deduct the amounts expended for those items on Schedule C of his 1998 return.2 Section 179 permits taxpayers (other than estates, trusts and certain noncorporate lessors) to elect to deduct the cost of qualifying depreciable property in the year in which the property is placed in service rather than to recover the cost through

With respect to depreciation, the only evidence presented by petitioners was a copy of the supporting schedule which had been - 9 - attached to the 1997 return and which summarized the various items claimed thereon as section 179 expenses and depreciation.

ablishment and only if the requirements of section 280A(c)(1) are met with respect to the regular business establishment. 3 Petitioners have not elected to deduct the cost of the computer or the computer-related equipment as a current expense under sec. 179. - 29 - A “regular business establishment” includes a portion of a dwelling unit that is exclusively used on a regular basis as the principal place of business for the taxpayer’s trade or business. Sec. 280A(c)(1)(A). For tax years beginning

With respect to depreciation, the only evidence presented by petitioners was a copy of the supporting schedule which had been - 9 - attached to the 1997 return and which summarized the various items claimed thereon as section 179 expenses and depreciation.

uctions and instead claimed a standard deduction on his 1998 return. On petitioner’s Schedule C, Itemized Deductions, he claimed an $11,522 loss, which comprised the following expense items: Expense Items Amount Car and truck $7,552 Depreciation and sec. 179 1,805 Legal and professional 209 Meals and entertainment: $1,269 less 50 percent ($635) 634 Utilities 944 Other expenses: ISP fees 319 Office supplies 59 Total expenses 11,522 - 4 - Petitioner did not report any income on his 1998 Schedule C

t. Mitchell v. Commissioner, 74 T.C. 578, 581 (1980); Kroll v. Commissioner, 49 T.C. 557, 561-562 (1968); Garlock v. Commissioner, 34 T.C. 2 Of the total amount claimed, $18,150 represented the cost of the plane that petitioner deducted pursuant to sec. 179, Election To Expense Certain Depreciable Assets. Petitioner, at trial, conceded a $2,527 adjustment in the notice of deficiency disallowing a deduction for clothing expenses. - 7 - 611, 614 (1960). However, there is an exception to this rule

her petitioner is entitled to a deduction for car and truck expenses in excess of that allowed by respondent in connection with a trade or business activity of petitioner known as Partners Travel; (2) whether petitioner is entitled to a depreciation/section 179 expense deduction in connection with Partners Travel in excess of that allowed by respondent; (3) whether petitioner is entitled to a $1,950 deduction for travel, meals, and entertainment expenses in connection with Partners Travel; and (

possessions corporation). This intertwining of 11(...continued) Entertainment Group, 493 U.S. 120, 128 (1989) (Marshall, J., dissenting); see also LaCroix v. Commissioner, 61 T.C. 471 (phrase “tangible personal property” interpreted for purposes of sec. 179). The same point, that differences in statutory terminology ordinarily lead to the conclusion of differences in meaning, is also made in Berry Petroleum Co. & Subs. v. Commissioner, 104 T.C. 584, 646 n.41 (1995), affd. without published opini

Petitioner’s claimed expense deductions that are at issue include: (1) A section 179 expense deduction of $7,000 for the van; (2) expenses in connection with the van for business-related travel of $4,182; (3) production and management fees of $999.20; and (4) music educator and professional convention expenses of $333.95.

The regulations similarly provide that “If a taxpayer elects to expense under section 179, no section 38 credit is allowable for the portion of the cost expensed.” Sec.

On their Schedules C, petitioners claimed amounts for car and truck expenses, depreciation and section 179 expense, insurance, legal and professional services, office expenses, rent, repairs and maintenance, taxes and licenses, and other expenses (including continuing education, professional dues, parking, telephone, group insurance, books and periodicals, drugs and medications, and supplies).

“Education Research and Publication.” Petitioners reported $1,875 in gross receipts, and claimed the following deductions for expenses: Advertising $140 Bad debts from sales or services 15 Car and truck 7301 Commissions and fees 340 Depreciation and sec. 179 expense 5,6822 Insurance 1,082 Interest (other than mortgage) 155 Legal and professional services 192 Office 460 Rent or lease of business property 62 Repairs and maintenance 390 Supplies 175 Taxes and licenses 324 Travel 1,670 Meals and ent

etitioner included a Schedule C relating to his drafting activity on which he reported gross income of $3,840 and a net loss of $1,548. Petitioner deducted the following expenses on his Schedule C: Expense Amount Car and truck 1$186 Depreciation and sec. 179 expense 3,485 Office expense 57 Rent or lease--vehicles, machinery, and equipment 189 Rent or lease--other business property 1401 Repairs and maintenance 30 Supplies 181 Taxes and licenses 90 Utilities 289 Other expenses (books) 16 Expenses

possessions corporation). This intertwining of 11(...continued) Entertainment Group, 493 U.S. 120, 128 (1989) (Marshall, J., dissenting); see also LaCroix v. Commissioner, 61 T.C. 471 (phrase “tangible personal property” interpreted for purposes of sec. 179). The same point, that differences in statutory terminology ordinarily lead to the conclusion of differences in meaning, is also made in Berry Petroleum Co. & Subs. v. Commissioner, 104 T.C. 584, 646 n.41 (1995), affd. without published opini

ised by petitioner in his petition. Petitioner claimed that the amount of gross receipts on Schedule C was overstated by $11,022. Thus, according to petitioner the 5 Petitioner elected to expense the cost of the two computers purchased in 1996 under sec. 179 on Form 4562, Depreciation and Amortization, and, therefore, is entitled to deduct the amounts as reflected herein. - 8 - correct amount of his gross receipts should be $34,578.6 In petitioner’s brief, he contends that the issue of the possi

The Schedule K-1 also listed petitioner’s distributive share of Quality’s section 179 expense deduction and other deductions as $644 and $800, respectively.

ication of two different meanings.” Pavelic & LeFlore v. Marvel Entertainment Group, 493 U.S. 120, 128 (1989) (Marshall, J., dissenting); see also LaCroix v. Commissioner, 61 T.C. 471 (phrase “tangible personal property” interpreted for purposes of sec. 179). The same point, that differences in statutory terminology ordinarily lead to the conclusion of differences in meaning, is also made in Berry Petroleum Co. & Subs. v. Commissioner, 104 T.C. 584, 646 n.41 (1995), affd. without published opini

in 1995. In the notice of deficiency, respondent disallowed the disabled access credit for 1995 and the associated carryforward to 1996; instead respondent treated the entire cost of the intraoral camera system as a deductible business expense under section 179. According to the explanation contained in the notice of deficiency, the disabled access credits attributable to the system were disallowed because the system “does not permit patients to be treated who were excluded from services before

- 34 - purposes of section 179, the Secretary prescribed in section 1.179-2(c)(6), Income Tax Regs., the following relevant rules as to the meaning of the phrase: (6) Active conduct by the taxpayer of a trade or business--(i) Trade or business.

veloping/improving patentable products”. The following items are reported on the Schedule C: Income Gross receipts $492 Returns/allowances 330 Cost of goods sold 3,502 Gross income (3,340) Deductions Advertising $320 Car and truck 1,264 Depreciation/sec. 179 expense deduction 10,312 Insurance 533 Office 1,565 Rent/lease 3,240 Supplies 1,008 Taxes/licenses 60 Meals/entertainment 641 Utilities 181 Other 1,020 Total expenses 20,144 Net Loss 23,484 1 According to the Form 4562, Depreciation and Amor

oses. Included with petitioners’ 1994 return is a Schedule C, Profit or Loss From Business, on which the income and deductions attributable to Specialty are reported as follows: - 3 - Gross income $136,871 Car and truck expenses 13,847 Depreciation/sec. 179 expense deduction 1,031 Insurance 719 Office expense 5,950 Rent/lease 828 Supplies 110,775 Taxes/licenses 2,500 Total expenses 135,650 Net Profit 1,221 According to the Schedule C, the above items were reported in accordance with the cash met

Respondent’s Notice of Deficiency In the notice of deficiency, respondent disallowed the disabled access credit for 1995 on the ground that the panoramic x-ray machine, the Wehmer x-ray machine, and the rare earth cassette do not constitute eligible access expenditures within the meaning of section 44.

ners reported no income from dividends, interest, royalties, or annuities. Petitioners owned at least eight rental apartments in the Binghamton, New York, area. Petitioners reported net rental 2 Respondent concedes that petitioners are entitled to a sec. 179 deduction of $4,261. Petitioners concede that their claimed Schedule E (Supplemental Income and Loss) deduction of $10,160 for medical expenses is improper, and that only $6,434 was incurred for medical expenses deductible as allowed on Sche

For the 1988 tax year, Glenwood reported ordinary losses of $517 and claimed $5,000 in section 179 expenses.

Petitioner did not make an election under section 179 that would permit him to deduct currently up to $10,000 of the cost of depreciable property in the year it was placed in service.

Depreciation The depreciation deductions here in question are, in actuality, deductions under section 179, which allows certain taxpayers to treat as an expense that is not chargeable to capital account the cost of certain depreciable property.

To qualify as a valid section 179 election, the election must specify the items to which the election applies, and the election must be made on the taxpayer’s return.

in 1995. In the notice of deficiency, respondent disallowed the disabled access credit for 1995 and the associated carryforward to 1996; instead respondent treated the entire cost of the intraoral camera system as a deductible business expense under section 179. According to the explanation contained in the notice of deficiency, the disabled access credits attributable to the system were disallowed because the system “does not permit patients to be treated who were excluded from services before

First, for purposes of section 179, the Secretary prescribed in section 1.179-2(c)(6), Income Tax Regs., the following relevant rules as to the meaning of the phrase: (6) Active conduct by the taxpayer of a trade or business — (i) Trade or business.

1, 1993 The following chart shows the amount of the depreciation and section 179 deductions that petitioners’ accountant calculated and that petitioners reported on Schedules C, Profit or (Loss) From Business or Profession, of petitioners’ returns for 1985, 1987, 1989, and 1990: Depreciation and Section 179 Deductions Accountant’s Petitioners’ Year schedules Schedules C 1985 $48,855 $51,308 1987 54,789 53,513 1989 4

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

Petitioners chose to include the entire gains realized from the sales of their real estate properties on their 1994 return because they had incurred and claimed a section 179 expense during 1994 of $17,500 that would substantially offset or mitigate the tax on - 3 - the gains realized from their real estate sales.

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

After concessions, the remaining issues are whether petitioners are entitled to a $12,554 section 179, and a $1,845 depreciation, deduction relating to newsstand construction.

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

litigating position and conceded that the following adjustments to petitioner’s Schedule C deductions were appropriate: - 4 - Claimed Deduction per return Allowed Disallowed Advertising $1,340 $511 $829 Car and truck 8,840 -0- 8,840 Depreciation & Sec. 179 exp. 10,260 3,205 7,055 Insurance 250 250 -0- Legal & prof. 1,750 1,750 -0- Office expense 200 200 -0- Repairs 425 425 -0- Supplies 660 660 -0- Travel 3,182 2,451 731 Meals & enter. $4,871 x 50% 2,435 1967 1,468 Utilities (phone) 635 635 -0-

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

On brief, petitioners concede they have failed to produce any evidence regarding the section 179 expense that Management claimed for its 1989 tax year.

On his Schedule C attached to his 1995 Federal income tax return, petitioner reported no gross receipts and claimed the following expenses: Advertising $91.27 Car/truck expenses 2,949.14 Depreciation/section 179 2,755.33 Supplies 131.21 Travel expense 229.17 Meals/entertainment 190.62 Other expenses 1,760.86 $8,107.60 Business use of home 8,281.35 Total expenses 16,388.95 In 1997, petitioner obtained a consulting contract with L Three Communications, a local aerospace company, but was not paid u

93 through an indirect method, petitioner received unreported gross income from two trade or business activities petitioner was engaged in; (4) whether an S corporation in which petitioner was a shareholder is entitled to an expense deduction under section 179 for the year 1993 in an amount greater than that allowed by respondent; (5) whether petitioner is entitled, for her 1988, 1989, and 1990 tax years, to deductions for net operating loss carrybacks from her 1991, 1992, and 1993 tax years; an

nd were not omitted from their return, but 12(...continued) check payable to American Express was for $335.48. 13We note that even if the expenses were substantiated, they appear to be capital in nature, which would require capitalization, absent a sec. 179 election. - 13 - rather, were incorrectly reported as $14,067 in rental income in petitioners' amended tax return.14 In general, section 61(a)(3) requires gains derived from the sale of property to be included in gross income. Petitioners fai

On a separate sheet, attach: (1) a description of the property and what depreciation method you elect that excludes the property from ACRS; and (2) the depreciable basis (cost or other basis, reduced, if applicable, by salvage value, investment credit, and the section 179 expense).

chedule C, Profit or Loss From Business, petitioner reported gross income from her medical practice and consulting work for the SSA in the total amount of $49,724, and claimed the following deductions: Car and truck expenses $7,011 Depreciation and section 179 expense deduction 3,264 Insurance 127 Mortgage interest 258 Office expense 5,800 Repairs and maintenance 6,278 Taxes and licenses 809 Travel, meals, and entertainment Travel 5,618 Meals and entertainment 826 Utilities 1,289 Other expenses

263(a)(1).6 The Supreme Court has held that a taxpayer’s expenditure that “serves to create or enhance * * * a separate and distinct” asset must be capitalized. Commissioner v. Lincoln Sav. & Loan Association, 403 U.S. 345, 354 (1971). Subsequently, the Court held that, although the separate-or-distinct-asset standard is a suffic

Whelpley's distributable income from WAI of $17,289 in 1987 and $7,644 in 1989, computed as follows: 1987 1989 WAI's corrected income $96,711 $85,435 Distributive share, 12.5% 12,089 10,679 Section 179 deduction (1,231) (1,250) 10,858 9,429 Loss from WAI, per return 6,431 -- Income from WAI, per return -- (1,785) Adjustment 17,289 7,644 - 14 - Respondent determined the subject deficiencies in the younger Mr.

Petitioners claimed a section 179 -1 3 - deduction for a hard disk drive in the amount of $1,500 on their joint Federal income tax return for the taxable year 1988.

Whelpley's distributable income from WAI of $17,289 in 1987 and $7,644 in 1989, computed as follows: 1987 1989 WAI's corrected income $96,711 $85,435 Distributive share, 12.5% 12,089 10,679 Section 179 deduction (1,231) (1,250) 10,858 9,429 Loss from WAI, per return 6,431 -- Income from WAI, per return -- (1,785) Adjustment 17,289 7,644 - 14 - Respondent determined the subject deficiencies in the younger Mr.

000 Sale of alfalfa -- -- -- -- 2,599 -- Sale of hay -- -- -- -- -- 1,700 Sale of tractor -- -- -- -- 1,600 -- Unexplained income -- -- -- -- -- 70 Gross income -- -- 75 875 5,649 3,270 Expenses: Breeding fees -- $(500) -- (234) -- -- Depreciation & sec. 179 -- (1,308) (3,363) (3,321) (3,692) (3,203) expenses Feed purchased $(1,886) (5,019) (7,596) (3,153) (880) (1,083) Fertilizers & lime -- -- -- -- -- (135) Freight & trucking (50) -- -- -- -- -- Gasoline, fuel, (280) -- -- -- -- -- oil Insuran

On Schedule C of his 1990 Federal income tax return, petitioner claimed a deduction of $2,618 consisting of expenses for advertising, bad debts, commissions and fees, depreciation and/or section 179 expenses, and meals and entertainment.

bile engine that was used in connection with a research or experimentation activity of Leonard Charles Ekman (petitioner); (2) if the automobile engine is not deductible as a research or experimentation expense, whether the cost is deductible under section 179; and (3) if the cost of the automobile engine is not deductible under either section 174(a) or section 179, whether the engine is depreciable under section 167.

On a timely filed tax return, subject to limitations, a taxpayer can elect to treat the cost of section 179 property as an expense.

The statutory notice disallowed $9,361 of the expenses claimed as a section 179 deduction.3 On their original 1989 return, petitioners claimed $12,860 in expenses relating to the business of Mr.

- 21 - Depreciation Deductions On his Schedule C, petitioner husband claimed section 179 expense of $4,410 and $9,607 for tax years 1987 and 1988, respectively, and depreciation for 1987 of $2,553.