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With respect to advertising and supplies expenses,
petitioner has not established the business purpose of these
expenditures or that they were WTS’s expenses, as opposed to
personal expenses or the corporation’s expenses. The same is
true for utilities expense. For example, petitioner introduced a
number of invoices from AT&T Wireless. The invoices are
addressed to petitioner, however, and do not reference WTS. In
addition, some of the invoices list petitioners’ home address,
while others list the office in Sacramento that WTS shared with
the corporation. Petitioner did not introduce evidence linking
the telephone number listed on the invoice to WTS, such as a WTS
business card or WTS letterhead. Nor did petitioner provide
evidence of his personal utilities expense or the corporation’s
utilities expense, which may have been circumstantial evidence
that WTS used the AT&T Wireless service and incurred the expense
in question.
WTS paid one-half of the rent for the office space it shared
with the corporation. While rent generally is an ordinary
business expense, petitioner testified that the office space was
“only a professional front” for WTS; i.e., WTS used it solely to
meet clients. Given the limited use that WTS made of the office
space, as well as the dearth of clients in the years at issue, it
appears that this expenditure may not have been a necessary
expense. See Alondra Indus., Ltd. v. Commissioner, T.C. Memo.
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Last modified: May 25, 2011