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A. Whether the Real Estate Activity Was Part of the
Construction Consulting Business
Mr. Finnegan ran the construction consulting business out of
his home in Santa Ana. As a construction consultant, Mr.
Finnegan worked for third parties; he was compensated regardless
of whether the projects he constructed were sold. There is no
evidence that he was responsible for selling the projects he
constructed.
Mr. Finnegan had a separate office and telephone line for
the real estate activity at the Acapulco house in San Clemente.
Mr. Finnegan was not hired by a third party to build the Acapulco
house; his receipt of any money from his work on the Acapulco
house was conditioned upon its sale; and petitioners were
responsible for selling the Acapulco house.
After reviewing all the facts and circumstances, we find
that the real estate activity was not part of petitioners'
construction consulting business. Petitioners, therefore, were
not entitled to deduct the additional expenses as costs of the
construction consulting business.
B. Whether the Real Estate Activity Was a Separate Trade or
Business
Deductions are a matter of legislative grace, and taxpayers
bear the burden of proving that they are entitled to any
deductions claimed. Rule 142(a); INDOPCO, Inc. v. Commissioner,
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