- 14 -
for disallowing any deductions in this case. Accordingly, we
will not inquire whether petitioner's activity of showing the
exotic automobiles was an activity engaged in for profit.
III. Trade or Business
For 1989 and 1990, respondent disallowed losses passed
through from the corporation to petitioner. Respondent
disallowed such losses in their entirety, in the amounts of
$13,218 and $13,357, for 1989 and 1990, respectively. The
corporation was an S corporation, and petitioner was entitled to
take into account his pro rata share of the corporation's items
of income and loss. See sec. 1366(a). One ground on which
respondent disallowed the losses was that, during 1989 and 1990,
the corporation was not carrying on a trade or business as
required by section 162(a).
Section 162(a) provides in pertinent part: "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".
The corporation reported neither gross receipts nor gross
income for either 1989 or 1990. Its ordinary losses reported on
its Federal income tax returns were composed of the following
items:
1989 1990
Taxes $38 $45
Interest 1,154 892
Advertising 38 100
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