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Additional Schedule C Deductions
Deductions are a matter of legislative grace, and taxpayers
bear the burden of proving that they are entitled to any deductions
claimed. Rule 142(a); New Colonial Ice Co. v. Helvering, 292 U.S.
435, 440 (1934). Taxpayers are required to maintain records that
are sufficient to substantiate claimed deductions. Sec. 6001.
Section 162 generally allows a deduction for all the ordinary
and necessary expenses paid or incurred during the taxable year in
carrying on any trade or business. Such expenses must be directly
connected with or pertain to the taxpayer's trade or business.
Sec. 1.162-1(a), Income Tax Regs. The determination of whether an
expenditure satisfies the requirements of section 162 is a question
of fact. Commissioner v. Heininger, 320 U.S. 467, 475 (1943).
Petitioner claims that she is entitled to a deduction in the
amount of $52,999.50, which she originally reported as cost of
goods sold on her Schedule C, and which was disallowed by
respondent. The $52,999.50 amount represented the sum of checks
drawn on petitioner's business bank account. These checks were
made payable to her husband, Mr. Maynard, and consisted of six
checks for $3,500, six checks for $5,000, a check for $1,983, and a
check for $16.50. The checks were deposited into the trust account
of Maynard & McDonald.
Petitioner alleges that these amounts were paid to Mr. Maynard
for consulting services he provided for her business. Petitioner
testified that Mr. Maynard advised her with respect to equipment,
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Last modified: May 25, 2011