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deduct commission expenses for 1994 and 1995 because he did not
establish the business purpose of the payments, he did not issue
Forms 1099 to the individuals he claims were independent
contractors for the tax preparation business in 1994 and 1995,
and his statement during the audit that he had only one
independent contractor conflicts with his testimony at trial that
he had 12-14 independent contractors in 1994 and 1995.
We disagree.
At trial, petitioner credibly testified that he paid
commissions to 12 to 14 independent contractors to work in his
tax preparation business in 1994 and 1995. At trial, he
introduced copies of canceled checks payable to the independent
contractors and testified about the work they performed. We
conclude that petitioner may deduct commission expenses of $7,980
for 1994 and $7,076 for 1995.4
Petitioner testified that he paid wages of $3,400 a year in
1994 and 1995 to each of his three children. Petitioner’s
children were ages 16, 12, and 8 in 1994. A taxpayer may deduct
payments for compensation if the amount paid is reasonable in
amount and for services actually rendered. See sec. 162(a)(1);
Home Interiors & Gifts, Inc. v. Commissioner, 73 T.C. 1142, 1154
4 The checks submitted at trial for 1994 and 1995 are
substantially more than the amount of commissions petitioner
deducted for those years. Petitioner did not explain the
difference.
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