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business plan, financial projections, and financial statements
for the activity.
On the Schedule C attached to their 1996 Federal income tax
return, petitioners reported a net loss from Glacial Jadeite in
the amount of $18,440. On the Schedule C, petitioners reported
no gross income and claimed substantial deductions for car and
truck expenses and rent. The return also reflects claimed
deductions for insurance, office expenses, repairs, meals and
entertainment, and miscellaneous expenses. Included in the rent
expense, petitioners claimed home office expenses in the amount
of $9,600. The home office expense consists of residential lease
payments that petitioners made in 1996. For the year 1997,
petitioners reported that the jade activity had gross receipts of
$50 and expenses of $18,578.85. Petitioners claim that the jade
activity had gross receipts of $250 and expenses of approximately
$18,000 for the year 1998.
Respondent determined that petitioners' jade activity was
not an activity engaged in for profit. In the alternative,
respondent determined that petitioners' claimed Schedule C
expenses were personal expenses and not ordinary and necessary
business expenses.
Section 183 provides that if an activity engaged in by an
individual is not engaged in for profit, no deduction
attributable to such activity shall be allowed, except as
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Last modified: May 25, 2011