Andrew and Margita Zards et al. - Page 12

                                       - 12 -                                         
          overruled on other grounds NCNB Corp. v. United States, 684 F.2d            
          285, 289 (4th Cir. 1982); Hardy v. Commissioner, 93 T.C. 684,               
          687-688 (1989); Jackson v. Commissioner, 86 T.C. 492, 514 (1986).           
          As the Court of Appeals for the Fourth Circuit said in Richmond             
          Television Corp. v. United States, 345 F.2d at 907:                         
                    The uniform teaching of  * * * [certain prior]                    
               cases is that, even though a taxpayer has made a firm                  
               decision to enter into business and over a considerable                
               period of time spent money in preparation for entering                 
               that business, he still has not "engaged in carrying on                
               any trade or business" within the intendment of section                
               162(a) until such time as the business has begun to                    
               function as a going concern and performed those                        
               activities for which it was organized.  [Fn. refs.                     
               omitted.]                                                              
               Except for the interest, depreciation, and taxes deducted by           
          Good Shepherd, all of Good Shepherd's deductions for 1986 through           
          1988 are deductions governed by section 162(a).                             
               Petitioners bear the burden of proof.                                  
                    1.  Verification                                                  
               Respondent has challenged whether expenditures claimed by              
          Good Shepherd were ever paid or incurred.  Petitioners have                 
          failed adequately to verify, or substantiate, those expenditures.           
          For 1987 and 1988, Good Shepherd claimed deductions for travel              
          and entertainment.  Petitioners have introduced no evidence that            
          would satisfy the special substantiation requirements imposed by            
          section 274(d) with regard to expenditures for travel and                   
          entertainment.  With regard to Good Shepherd's other expenditures           
          claimed for deduction under section 162(a), for the most part,              





Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011