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petitioners were liable, pursuant to section 6662(a), for an
accuracy-related penalty of $108.
OPINION
I. Trade or Business Expense Deductions
Section 162(a) permits the deduction of expenses paid or
incurred during the taxable year in carrying on a trade or
business. To be deductible, the expenditure must be an ordinary
and necessary expenditure of the business. Sec. 162(a); Welch v.
Helvering, 290 U.S. 111, 113 (1933). An expense is ordinary if
it is customary or usual within a particular trade, business, or
industry. Deputy v. Du Pont, 308 U.S. 488, 495 (1940). An
expense is necessary if it is appropriate and helpful for the
business. Commissioner v. Heininger, 320 U.S. 467, 471 (1943).
Section 262 disallows deductions for personal, living, or family
expenses. Petitioners bear the burden of proving their
entitlement to the deductions. Rule 142(a); New Colonial Ice Co.
v. Helvering, 292 U.S. 435, 440 (1934).
During the years in issue, petitioners' day-care service
generated $7,669 in revenue while incurring $106,333 in expenses.
On the whole, it is readily apparent that petitioners have used
their day-care service as a means to deduct virtually all of
their personal expenses. For example, petitioners in 1993
deducted the cost of 632 meals as business expenses. Mr. Simpson
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