Dean W. and Tammy R. May - Page 5

                                        - 5 -                                         
          in the development of the taxpayer's business.   Welch v.                   
          Helvering, supra.                                                           
               Petitioner did not adequately explain why the payments were            
          appropriate or helpful to his business, or how he expected them             
          to produce commensurate benefits for his business, and we fail to           
          see how such payments could be considered normal, usual, or                 
          customary in the operation of a piano service and sales business.           
          Because petitioners have failed to establish that the payments              
          were ordinary and necessary business expenses within the meaning            
          of section 162(a), respondent's adjustment disallowing the                  
          business deduction for each year is sustained.2                             
          2. Self-Employment Tax                                                      
               In addition to other taxes, section 1401 imposes a tax on              
          the self-employment income of an individual.  With the exception            
          of circumstances not present here, section 1402(b) defines self-            
          employment income as net earnings from self-employment derived by           
          an individual.  Sec. 1402(b)(2).  The term "net earnings from               


          2In the computation of the deficiencies, respondent allowed                 
          the payments in dispute as charitable contribution deductions               
          pursuant to sec. 170.  The provisions of sec. 162(b) and sec.               
          1.162-15(a), Income Tax Regs. (which deny deductions under sec.             
          162(a) for contributions deductible under sec. 170), however,               
          were not relied upon by respondent in her notice of deficiency or           
          in her brief.  Consequently, we did not directly consider the               
          applicability of those sections.  Other than respondent's                   
          recharacterization, the record is insufficient to allow for an              
          independent determination of whether the payments in dispute                
          constituted charitable contributions within the meaning of secs.            
          162(b) and 170.  For a discussion on this point, see Marquis v.             
          Commissioner, 49 T.C. 695 (1968).                                           




Page:  Previous  1  2  3  4  5  6  7  8  9  10  Next

Last modified: May 25, 2011