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and (2) the $920,000 is properly characterized as the value of
Mr. Tonn’s labor, as determined by the appraisal performed by
Russell Associates.
In viewing the factual materials and the inferences drawn
from them in the light most favorable to petitioners, we find
that their pleadings raise claims for a deduction or loss under
sections 162, 165, and 166. It appears that petitioners are
arguing that they are entitled to a loss for either (1) the value
of Mr. Tonn’s labor which petitioners will not recover because of
the alleged collection activities of respondent, or (2) the
amount of the payments that Laurington failed to make to
petitioners under the installment sale for the on-farm energy
equipment.8 In either situation, petitioners are not entitled to
a deduction or loss as a matter of law.
The value of labor performed by a taxpayer does not
constitute an amount “paid or incurred”, and, for that reason, a
cash basis taxpayer is not entitled to deduct the value of his or
her own labor as a business expense under section 162(a).
Maniscalco v. Commissioner, 632 F.2d 6, 7-8 (6th Cir. 1980),
8An exhibit signed by Mr. Tonn that sets forth a summary of
his claim is attached to respondent’s motion for partial summary
judgment. In the document, Mr. Tonn claims that as a result of
the seizure activities in March 1987, Laurington was unable to
make installment payments to Mr. Tonn. Mr. Tonn further states
that the $920,000 loss flowed from the March 1987 seizure
activities and included “receivables from the Laurington
Corporation relating to the energy equipment research, inventory,
equipment, manufactured goods, and vehicles.”
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