Juan N. and Miriam J. Villareal, et al. - Page 12

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               Petitioners additionally claimed utility expense deductions            
          in the amount of $142 on line 25 of their 1994 Schedule C.  This            
          amount represented utilities actually used by petitioners at                
          Villa Cabana.                                                               
               At trial, petitioner did not offer any testimony which would           
          indicate any attempt to substantiate petitioners' "other expense"           
          deductions for the 1994 tax year by contacting petitioners'                 
          former utility, telephone, or credit card companies.                        
               We do, however, find petitioner's testimony credible that              
          petitioners paid $1,755 a month in rent for commercial space in             
          San Antonio.  We hold that petitioners are entitled to deduct               
          "other expenses" in the amount of $1,755 for rent expenses                  
          incurred for December of the 1994 tax year.  Petitioners are not            
          entitled to deduct the $1,755 deposit for the last month's rent.            
               We also find that petitioners incurred utility expenses for            
          December in the amount of $142 as reported by petitioners on                
          Schedule C of their 1994 Federal income tax return.  Petitioners            
          cannot deduct utility or telephone deposits made during the 1994            
          tax year.                                                                   
               e.  Insurance                                                          
               Petitioners contend that they carried a business liability             
          policy for the years at issue.  Though petitioners' 1994                    
          transaction reports list insurance expenses of $479, petitioners            
          did not claim any deduction for insurance expenses on their 1994            






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