Richard William Corduan - Page 12




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          fees of $14,500 were reported in 1997.  Asked at trial if he paid           
          an attorney $14,500 in legal fees, petitioner replied:  “Yes, I             
          did.  It wasn’t legal fees--well, most of--about $5,000 of that             
          was legal fees” used to “save my home from being foreclosed.”  We           
          uphold respondent’s disallowance of the LLC losses.                         
               The next item at issue is petitioner’s entitlement to the              
          deduction of certain business expenses and the subtraction from             
          gross receipts of an amount of cost of goods sold.  Petitioner              
          filed a Schedule C in 1995 for a business engaged in “brick and             
          patio construction”.  Petitioner subtracted from zero gross                 
          receipts cost of goods sold of $13,719 and deducted expenses of             
          $3,500.  Respondent disallowed both the cost of goods sold                  
          adjustment and the expenses deduction.                                      
               Expenses which are ordinary and necessary in carrying on a             
          trade or business generally may be deducted in the year in which            
          they are paid.  See sec. 162(a).  Cost of goods sold is                     
          subtracted from gross receipts in determining a taxpayer’s gross            
          income.  See Sullenger v. Commissioner, 11 T.C. 1076 (1948).                
               Petitioner provided nothing to support the deductions or the           
          cost of goods sold on the Schedule C.  We therefore uphold                  
          respondent’s disallowance.  We note briefly that the business               
          activity referenced on this Schedule C actually may have been               
          that of a corporation named Simblu Brick & Patio Company.  A                
          corporation is a separate legal entity, and an individual                   






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