John Awadallah and Susan Malaty - Page 6




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          preparation of the return and testimony by petitioner’s                     
          accountant bear little relationship to reality.                             
               While the record in this case has made fact finding                    
          difficult, we nevertheless have carefully reviewed this record to           
          analyze the issues and make findings and conclusions.                       
               B. Schedule C Expenses                                                 
               Section 162(a) permits a deduction for the ordinary and                
          necessary expenses paid or incurred during the taxable year in              
          carrying on a trade or business.  An expense must be directly               
          connected with, or proximately result from, a trade or business             
          of the taxpayer.  See Kornhauser v. United States, 276 U.S. 145,            
          153 (1928); O’Malley v. Commissioner, 91 T.C. 352, 361 (1988).              
          Expenses that are personal in nature are generally not allowed as           
          deductions.  See sec. 262(a).  Deductions are a matter of                   
          legislative grace, and taxpayers must comply with the specific              
          requirements for any deduction claimed.  See INDOPCO, Inc. v.               
          Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.               
          Helvering, 292 U.S. 435, 440 (1934).                                        
               A taxpayer is required to maintain records sufficient to               
          establish the amount of his income and deductions.  See sec.                
          6001; sec. 1.6001-1(a), (e), Income Tax Regs.  A taxpayer must              
          substantiate his deductions by maintaining sufficient books and             
          records to be entitled to a deduction under section 162(a).                 








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