Robert A. Inzano and Martha O. Chavez - Page 4

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                    Advertising              $12,940                                  
                    Car and truck            5,200                                    
                    Insurance                5,400                                    
                    Legal                    3,100                                    
                    Office                   6,000                                    
                    Rent                     6,900                                    
                    Repairs and Maintence    2,100                                    
                    Supplies                 4,790                                    
                    Tax and licenses         550                                      
                    Utilities                 3,150                                   
                    Total                    50,130                                   
               In preparing their return, petitioners had to rely upon                
          estimates, for their records had been lost.  Thus, it is not                
          clear whether the income figure is accurate.  Moreover,                     
          petitioners neglected to deduct their labor costs for the                   
          cleaning help.2  In the notice of deficiency, respondent                    
          disallowed all claimed expenses for lack of substantiation.  In             
          addition, respondent determined that there was no reasonable                
          cause for the delinquent filing and asserted the addition to tax            
          under section 6651(a)(1).                                                   
          Discussion                                                                  
               Section 162(a) allows the deduction of “ordinary and                   
          necessary” expenses paid or incurred during the taxable year in             
          carrying on any trade or business.  Deductions are a matter of              
          legislative grace, and taxpayers must prove that they are                   
          entitled to the claimed deductions.  Rule 142(a); INDOPCO, Inc.             
          v. Commissioner, 503 U.S. 79, 84 (1992).  They must keep                    

          2  JDB had no employees.  All cleaning work was done by                     
          petitioners and “subcontractors” hired at the time work was                 
          required.                                                                   




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