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petitioner also ran a mortgage loan business. Petitioners'
taxable income was derived from the following sources:7
Source 1989 1990
Interest $5,002 $2,011
Mortgage Business (3,567) 5,079
Rental Income (1,743) (1,196)
Capital Gains 107,737 18,215
Total Income $107,428 $24,108
Petitioners filed joint Federal income tax returns for the
taxable years 1989, 1990, and 1991. In each of these years,
petitioner deducted $33,333 in depreciation for the J car on a
Schedule C. He reported no income from this activity in any of
the years. Respondent disallowed the depreciation deductions
related to the car on the ground that petitioner was not engaged
in a trade or business for profit or an activity for production
of income. The year 1991 is not before the Court.
OPINION
The issue is whether petitioner may deduct depreciation for
the J car in the amount of $33,333 per year for the taxable years
1989 and 1990. Petitioner contends that he was engaged in the
business of selling the car, or copies of it, during the years at
issue and that the car had a cost basis of $100,000. Respondent
disagrees with petitioner's position on both of these points.
7 All amounts are rounded to the nearest whole dollar. This
rounding accounts for the apparent discrepancies in the totals.
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