Jefferry Phuong Vo and Mai Xuan Nguyen - Page 6




                                        - 5 -                                         
                                     Discussion                                       
               Deductions are allowed under section 162 for the ordinary              
          and necessary expenses of carrying on an activity which                     
          constitutes the taxpayer's trade or business.  Deductions are               
          allowed under section 212 for expenses paid or incurred in                  
          connection with an activity engaged in for the production or                
          collection of income, or for the management, conservation, or               
          maintenance of property held for the production of income.                  
               To be engaged in a trade or business within the meaning of             
          section 162, “the taxpayer must be involved in the activity with            
          continuity and regularity” and “the taxpayer's primary purpose              
          for engaging in the activity must be for income or profit.”                 
          Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987).  In                    
          addition, the taxpayer’s business operations must actually have             
          commenced.  See Thomason v. Commissioner, T.C. Memo. 1997-480;              
          Scagliotta v. Commissioner, T.C. Memo. 1996-498; McManus v.                 
          Commissioner, T.C. Memo. 1987-457, affd. per curiam without                 
          published opinion 865 F.2d 255 (4th Cir. 1988).  An examination             
          of the facts and circumstances of each case is necessary to                 
          determine whether a taxpayer is carrying on a trade or business.            
          See Commissioner v. Groetzinger, supra at 36.                               
               It is unclear on what basis respondent determined that                 
          petitioners’ activity with respect to Solarsys did not constitute           
          a business in 1995.  Upon consideration of all the evidence in              






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