- 17 - 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.Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
Last modified: May 25, 2011