- 8 -
1402(a)(1). Accordingly, we hold that petitioners are not liable
for self-employment tax for 1994.3
Claimed Deductions
Claimed Deductions Relating to the Ten Parcels
Petitioners claimed in their 1994 Schedule C various ex-
penses with respect to the activity in which they engaged involv-
ing the ten parcels. They did not, however, claim any deprecia-
tion with respect to those parcels. In the notice, respondent
disallowed the expenses that petitioners claimed in their 1994
Schedule C because they did not establish that those expenses
were paid or incurred during 1994 and/or that they were ordinary
and necessary expenses within the meaning of section 162(a).
Petitioners contend that they are entitled to all of the
expenses that they claimed in their 1994 Schedule C except for
certain expenses which they have conceded. In addition, they now
claim that they are entitled to depreciation for each of the ten
parcels in question. Respondent disagrees.
Deductions are strictly a matter of legislative grace, and
petitioners bear the burden of proving that they are entitled to
any deductions claimed. INDOPCO, Inc. v. Commissioner, 503 U.S.
3 In order to resolve the self-employment tax issue
presented, we need not decide whether petitioners correctly
included the rental payments from the ten parcels in question in
their 1994 Schedule C or whether they should have included those
payments in Schedule E for that year. That is because,
regardless whether petitioners were engaged in an activity during
1994 involving the ten parcels in question that constituted a
trade or business, we have found that petitioners were not
engaged during that year in a trade or business as real estate
dealers.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011