- 10 -
inattentive or indifferent to the outcome, in terms of profit or
loss, of Robco’s activities. On the contrary, he was scrupulous
in his dealings with the homeowners association, ensuring that
while Robco did not make a profit, Robco’s costs were fully
reimbursed.
In sum, we hold that Robco was an activity conducted for
profit in 2002. We therefore now must decide whether the amounts
petitioners claimed as expenses in connection with Robco are
allowable deductions.
Section 162(a) allows a deduction for ordinary and necessary
business expenses paid or incurred during the taxable year in
carrying on any trade or business. For an expense to be
“ordinary” the transaction that gives rise to it must be of a
common or frequent occurrence in the type of business involved.
Deputy v. du Pont, 308 U.S. 488, 495 (1940). To be “necessary” an
expense must be “appropriate and helpful” to the taxpayer’s
business. Welch v. Helvering, supra at 113-114.
Where a taxpayer establishes entitlement to a deduction but
does not establish the amount of the deduction, the Court in some
circumstances is allowed to estimate the amount allowable. Cohan
v. Commissioner, 39 F.2d 540 (2d Cir. 1930). But see sec. 1.274-
5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6,
1985). However, there must be sufficient evidence in the record
to permit the Court to conclude that a deductible expense was
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: November 10, 2007