- 8 -
sufficient nexus between their day-care service and these
supplies.
Petitioners also deducted the cost of several home
improvements, including landscaping, a deck, and a fence around
their pool. Petitioners have failed, however, to establish that
these expenditures were ordinary and necessary for their
businesses. Even if petitioners could establish that these
expenditures were ordinary and necessary, they are not currently
deductible. Instead, the expenditures, pursuant to section
263(a), would have to be capitalized.
Petitioners also deducted expenses relating to cable
television, gas, electricity, telephone service, garbage removal,
and water. The deduction for telephone service is expressly
prohibited by section 262(b). The remaining utility expenses are
deductible, subject to the limitations of section 280A(c)(4).
Section 280A(a) generally prohibits deductions attributable to a
dwelling unit that is used as a residence. Section 280A(c)(4)
provides an exception for the trade or business of providing day-
care services. The exception is limited, however, by a special
allocation formula. See sec. 280A(c)(4)(C). Petitioners have
failed to provide sufficient evidence to make the allocation
required by section 280A(c)(4). Therefore, the remaining utility
expenses are not deductible.
In essence, petitioners have failed to establish that any of
the disallowed expenditures were ordinary and necessary for their
Page: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011