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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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