- 3 -
and personal care products, principally aloe vera products from
the Living Products company. Petitioners reported the hauling
activity and the retail sales activity on a single Schedule C for
each of the taxable years 1993 and 1994. Ruby also operated a
rooming house during the taxable years at issue. Petitioners
purchased the rooming house on January 29, 1993.
The signature date of each petitioner on their 1993 return
is June 4, 1994. Petitioners' 1993 return was mailed to the
Internal Revenue Service (Service) in an envelope bearing the
date June 7, 1994. The Service received petitioners' 1993 return
on June 13, 1994. Petitioners did not request an extension of
the date to file their 1993 return.
Respondent, inter alia, adjusted petitioners' gross
receipts, adjusted the costs of goods sold attributable to Ruby's
business, and disallowed in whole or in part many Schedules A and
C deductions. Respondent disallowed some claimed expenses
because it was not established that the expenses were paid or
incurred during the taxable year, and that they were ordinary and
necessary, or because it was not established that a business
benefit could reasonably be expected as the result of incurring
entertainment expenses. Respondent also determined that
petitioners were subject to self-employment tax.
Deductions are strictly a matter of legislative grace.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New
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