Andrew and Margita Zards et al. - Page 11

                                       - 11 -                                         
          Petitioners have failed, however, to provide statements of fact             
          on which they base their assignments of error as to respondent's            
          determinations of additions to tax, as required by Rule 34(b).              
          II.  Deficiencies in Tax                                                    
               A.  Ordinary and Necessary Business Expenses                           
               In pertinent part, section 162(a) provides:  "There shall be           
          allowed as a deduction all the ordinary and necessary expenses              
          paid or incurred during the taxable year in carrying on any trade           
          or business".  To qualify for deduction under section 162(a), an            
          item must (1) be paid or incurred during the taxable year, (2) be           
          for carrying on any trade or business, (3) be an expense, (4) be            
          a necessary expense, and (5) be an ordinary expense.  INDOPCO,              
          Inc. v. Commissioner, 503 U.S. 79, 85 (1992).  By raising an                
          issue of verification, respondent challenges whether petitioners            
          have met the first qualification set forth above.  Respondent has           
          also challenged whether petitioners have met the second                     
          qualification.  An item fails to meet the second qualification              
          that it be for carrying on a trade or business if it is a                   
          preopening expense.  A preopening expense is an expense incurred            
          between the decision to establish a business and the actual                 
          beginning of business operations.  See, e.g, Richmond Television            
          Corp. v. United States, 345 F.2d 901, 907 (4th Cir. 1965),                  
          vacated and remanded on other issues 382 U.S. 68 (1965), original           
          holding on this issue reaffd. 354 F.2d 410, 411 (4th Cir. 1965),            






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011