- 25 -
personal expense, which is not deductible under section 162(a).8
We agree with respondent.
Although Holland America used the solarium to experiment
with growing Echinacea at some point during FYE 1993, petitioners
failed to convince us that the new solarium was used primarily
for business during FYE 1993 or that it was used primarily for
business purposes thereafter. Petitioners produced several
photographs which showed the new solarium almost completely
empty, demonstrating neither a business purpose nor a personal
purpose for the new solarium. The record was remarkably silent
regarding the business use of the new solarium after September
30, 1993. Although both Mr. and Mrs. Dobbe testified that the
new solarium was not used for personal purposes in 1993, we did
not find their testimony convincing on this point. We are not
required to accept petitioners’ self-serving, undocumented
testimony. See Wood v. Commissioner, 338 F.2d 602, 605 (9th Cir.
8In his notice of deficiency respondent determined in the
alternative that if any part of the solarium costs was incurred
primarily to benefit the business of Holland America, it is a
capital expenditure that is not deductible but is subject to
depreciation under the MACRS guidelines with a 27.5-year recovery
period. The record does not contain any evidence as to the
useful life of the solarium, nor does the record disclose how
Holland America had any depreciable interest in the solarium.
Holland America did not own the residence that the solarium
improved, nor did it have a leasehold interest with respect to
the residence. We need not decide whether the solarium expense
must be capitalized because of our holding, infra, that the cost
of constructing the solarium was not incurred for the primary
benefit of Holland America.
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011