- 4 - activity was “an active trade or business” or that it “has been operated in a businesslike manner”. Both parties treated this language as raising an issue under section 183(a), which provides that “In the case of an activity engaged in by an individual or an S corporation, if such activity is not engaged in for profit, no deduction attributable to such activity shall be allowed” (the section 183 issue). Alternatively, respondent determined that “If the Schedule C activity is determined to be a legitimate business,” the expenses were not ordinary and necessary business expenses under section 162 (the section 162 issue). On October 9, 1997, petitioner filed a petition to redetermine the deficiencies, in which he alleged that each of the proposed adjustments was erroneous. In respondent’s answer, filed on November 24, 1997, respondent denied petitioner’s allegations of error and also denied some of petitioner’s factual allegations for lack of sufficient information. The parties resolved most of the issues prior to trial,3 leaving just two issues to be tried: (1) Whether petitioner’s 3Prior to trial, the parties entered into two stipulations of settled issues. In the first such stipulation, petitioner conceded three of the previously disputed adjustments. In the second such stipulation, petitioner conceded the adjustment with respect to the exercise of stock options in Zila, Inc., and the parties agreed on the disposition of adjustments relating to NOL deductions and carrybacks for 1991 and 1993. In the stipulation of facts filed just prior to trial, the parties resolved the sec. 162 issue with respect to petitioner’s claimed mining expense deductions.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011