-5-
in July 1989, and resigned in December 1989, when it was apparent
that his position as president of Aero-Motive would be terminated.
Approximately $5,000 of the country club expenses represents an
initiation fee; the balance is for client entertainment.
Respondent disallowed the deduction for country club fees and
expenses claiming (1) the membership fees are a capital expenditure
and (2) they are not ordinary and necessary business expenses.
On petitioners' amended 1989 tax return, the amount claimed as
unreimbursed employee business expenses, other than country club
fees and expenses, was reduced from $14,542 ($19,562 - $5,020) to
$1,936. At trial and in their posttrial brief, petitioners state
they are willing to concede 60 percent of the $1,936, so that now
they claim $774 for unreimbursed employee business expenses.
Respondent disallowed the deduction for unreimbursed employee
business expenses claiming (1) petitioners failed to substantiate
these expenses and (2) petitioners did not prove Mr. Martin's
employer would have denied reimbursement for these expenses had Mr.
Martin sought it.
Investment Expenses
On Schedule A of their 1989 return, petitioners deducted
$2,101 as investment expenses. On petitioners' amended 1989 tax
1(...continued)
expenses and reported the payment as income to Mr. Martin on his
W-2, the claimed deduction for the country club fees and expenses
should have been characterized as "other expenses" rather than
unreimbursed employee business expenses.
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