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deductible under section 162 as an ordinary and necessary
business expense. See sec. 162(a)(1).
Ms. Kang was the only employee of Donut Star. She received
Forms W-2, Wage and Tax Statement, during the years in issue
reporting $12,000, $12,000, and $5,000, respectively, for 1995,
1996, and 1997. From the record, we note that during 1995 Mr.
Ngo paid Ms. Kang a monthly salary or wage of $923.50, totaling
$11,082; however, the claimed deduction is for a gross amount of
$12,000. Due to lack of substantiation, Mr. Ngo is entitled to a
deduction of $11,082. Furthermore, Mr. Ngo’s records do not
substantiate salary/wages expenses of $12,000 during 1996. In
examining Mr. Ngo’s business ledger for 1996, we find that Ms.
Kang was paid only $8,464.50, corresponding to the amount allowed
by respondent. Therefore, respondent’s determination is
sustained as to 1996.
For 1997, we find that Ms. Kang actually received $12,617.50
for her services rendered to Donut Star, despite the inconsistent
Form W-2 issued to her. Therefore, Mr. Ngo is entitled to a
deduction of $12,617.50, less employment credits.
6. Insurance
Mr. Ngo claimed insurance expense deductions of $1,535 in
1997. Respondent disallowed the entire amount. After reviewing
the record, we find that Mr. Ngo’s business ledger sufficiently
supports, and thus substantiates, the insurance expense of
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