- 4 -
absence of any substantiation, we sustain respondent in his
disallowance of the bulk of these deductions.
The second issue for decision is whether petitioners are
entitled to disallowed deductions for business expenses.
Petitioners filed a Schedule C, Profit or Loss From Business, in
each year in issue, claiming that petitioner was engaged in a
sales business. The following were reported on these schedules:
1995 1996 1997
Gross receipts or sales $918 $550 $500
Car and truck expenses (15,862) (15,314) (16,506)
Office expense (950) -0- -0-
Travel -0- (2,800) (3,200)
Meals and entertainment (5,100) (2,900) (3,350)
Other (telephone) (3,500) (2,300) (2,400)
Net loss (24,494) (22,764) (24,956)
No cost of goods sold was reported in any year for this sales
business. In the notice of deficiency, respondent disallowed the
expenses to the extent they exceed the gross receipts. The
disallowance was made on several grounds: Petitioners had not
established that the sales activity was a trade or business which
was entered into for profit within the meaning of section 183 and
which had economic substance other than the avoidance of taxes.
Petitioners also had not (a) established that the expenses were
incurred in such a trade or business for the stated purposes, (b)
established that the expenses were other than nondeductible
personal expenses, and (c) substantiated the amounts of the
expenses and met the recordkeeping requirements of section 274.
Page: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011