Jeffrey C. and Kelly O. Stone - Page 6

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          1.  Meal Expenses, Sales Promotions                                         
               Petitioners provided receipts or canceled checks for                   
          approximately $1,523 paid to various restaurants and food stores.           
          In addition, they provided receipts and canceled checks in the              
          approximate amount of $965 for "sales promotion".  Included in              
          the alleged expenses are amounts expended for what Mr. Stone                
          described as "public relations" and "to get my name out."  Other            
          alleged expenses were for Mr. Stone "just to grab a bite to eat",           
          the children's birthdays, Christmas presents for nephews, and               
          gifts and entertainment of friends who also were clients.  Mr.              
          Stone was unable to identify the type of business that was                  
          discussed at the time the entertainment or meal expenses were               
          incurred or the business reason for the gifts.                              
               With regard to the expenditures that involved the children,            
          petitioners argue that their children help in the business by               
          answering the telephone and in general, but unspecified, ways.              
          We bear in mind that the children were quite young (ages 4                  
          through 12), and regardless of the contributions they might have            
          made, these expenditures would have been incurred for personal              
          reasons.  These are clearly personal expenses.  With regard to              
          the entertainment of and gifts to friends, petitioners argue                
          that, if they derive any income from their friends for services             
          rendered, they are entitled to claim business expense deductions.           
          While friendship with the recipient is not necessarily fatal to             
          the deductibility of an expense, petitioners must show that the             




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