- 10 -
$70,611, are deductible as a Schedule A miscellaneous itemized
deduction as opposed to a Schedule C deduction.3 Respondent also
determined that petitioner is entitled to an additional
depreciation deduction on her Schedule C in the amount of $3,180.
OPINION
The issues for our consideration are: (1) Whether legal
fees in the substantiated amount of $64,412.36 and/or $6,198.64
of expenses in connection with SLS are deductible on petitioner’s
Schedule C as ordinary and necessary business expenses or whether
they are deductible on petitioners’ Schedule A as unreimbursed
employee business expenses subject to the 2 percent of adjusted
gross income floor and the alternative minimum tax, and (2)
whether petitioners are liable for an accuracy-related penalty
under section 6662(a).
Legal Expenses
Section 162(a) allows a deduction for “all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business”. Ordinary and necessary legal
expenses are generally deductible under section 162(a) when the
matter giving rise to the expenses arises from, or is proximately
3 While petitioners deducted $87,300 in legal and
professional fees on Schedule C, Profit or Loss From Business, of
their Form 1040, U.S. Individual Income Tax Return, in 1994, they
have conceded that only $70,611 has been substantiated. Of the
$70,611 in substantiated expenses, $6,198.64 were expended by
petitioner for services in connection with petitioner’s Save-a-
Live systems (SLS) business.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011