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petitioner included the amounts paid to the production assistant
in the $21,876 of income reported on Schedule C.
Nor are we inclined to give petitioner the benefit of the
doubt--much less consider that he has carried his burden of
proof--that any part of the amount claimed was paid for services
provided by sound engineers. Petitioner admitted that he usually
paid for such services in cash because he was thereby able to
obtain discounts from market rates charged by service providers
who were moonlighting after hours from their regular jobs. We
are sufficiently familiar with the operations of the underground
economy to say that a taxpayer who makes payments in cash to
facilitate income tax underreporting and unauthorized use of
employer facilities by employee service providers does not
thereby convince us, without documentation, that he has incurred
and paid deductible expenses.
With respect to the legal fee portion of petitioners' claim,
petitioner failed to provide the Court with sufficient
information to determine if the legal expenses claimed were
related to the business or were personal in nature. Petitioner
testified that the legal fees were partly for a bankruptcy that
he had filed in the previous year and for the attorney to review
"contracts".
Respondent's determination on this issue is sustained in
full.
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Last modified: May 25, 2011