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relating to his improvements of Ms. Choe's properties on the same
Schedule C he used for his medical practice. Petitioner concedes
that he could not combine his real estate activity and medical
practice on one Schedule C, and that he was not entitled to
deduct or treat as costs of goods sold the expenditures of his
real estate activity on his medical practice Schedule C.
Petitioner also concedes that he was not entitled to deduct the
mortgage interest and property taxes on his Schedule A.
Petitioner argues, however, that: He was in the
construction business; he incurred expenses relating to his
improvements of Ms. Choe's properties in connection with this
separate business; these expenses were deductible pursuant to
section 162; therefore, he can offset these expenses against his
medical practice income.7 Respondent asserts that petitioner has
not shown he was in a trade or business; consequently, section
162 does not support his claimed deductions. Respondent further
argues, in the alternative, that should we find that petitioner
was in a trade or business, then his real estate activity
expenditures must be capitalized.
Taxpayers are allowed a deduction for ordinary and necessary
expenses paid or incurred in carrying on a trade or business.
7 Petitioner's argument, basically, seems to be that he
made the mistake of combining the expenses of his two businesses
on one Schedule C and deducting the mortgage interest and real
estate taxes related to Ms. Choe's properties on his Schedule A
instead of his Schedule C.
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