- 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 theirPage: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011