- 3 -
On Schedule C of petitioner's 1989 Federal income tax
return, petitioner deducted $11,000 as "away from home" expenses,
$1,781 in car and truck expenses, and draw expenses of $28,175.
He also claimed a deduction for health insurance premiums in the
amount of $3,937. Respondent received petitioner's return on
January 6, 1992.
Upon examination, respondent disallowed the deductions
related to away from home, car and truck, and draw expenses.
Respondent also determined that the deduction for petitioner's
health insurance premiums was treated incorrectly, and allowed
him a deduction from gross income of 25 percent of the amount
paid. As a result of the Schedule C adjustments, which turned
the reported business loss into a business profit, respondent
determined that petitioner was liable for self-employment income
tax.
As a general rule, deductions for personal living expenses
are disallowed under section 262. Commissioner v. Flowers, 326
U.S. 465, 470 (1946). Section 162(a), however, allows taxpayers
to deduct "the ordinary and necessary expenses paid or incurred
during the taxable year in carrying on any trade or business,
including * * * traveling expenses (including amounts expended
for meals and lodging * * *) while away from home in the pursuit
of a trade or business". With regard to deductions claimed under
section 162(a)(2), the expense must be (1) reasonable and
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