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Generally, there is no deduction for the purchase of equipment.
On a timely filed tax return, subject to limitations, a taxpayer
can elect to treat the cost of section 179 property as an
expense. To avail oneself of the benefits of section 179, the
taxpayer must make an irrevocable election on the tax return.
Sec. 179(a), (c). Petitioners made no such election. In order
to depreciate an asset, there must be evidence that it was put
into service during the year in question for use in a trade or
business. Petitioners offered no such evidence.
Although the Yogurt Station's tax returns had no deduction
for auction expenses,13 petitioners seek to deduct checks made
payable to cash under this category. Petitioners have not met
their burden of showing that this side business existed.
After carefully reviewing the 1989, 1990, and 1991 check
spreads, based on the observations made above, we conclude that
they are unreliable as substantiation for additional expenses.
Based on the record as a whole, and as discussed below, we find
that petitioners' testimony lacks credibility. The check spreads
are simply too little, too late. In fact, were we to rely on
them, we would allow petitioners fewer total deductions than
respondent has already allowed in her notice of deficiency. We
find insufficient evidence in the record to justify allowance of
any deductions in excess of those claimed on the Yogurt Station's
13 The store's returns made no mention at all of an auction
(sale of used restaurant equipment) business.
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