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net loss of $8,279 in 1997 on his Schedule C.
In 1997, petitioner reported $2,625 in rent received on his
Schedule E, Supplemental Income and Loss, attached to his 1997
return. On the Schedule E, petitioner’s Hallwood residence was
listed as the rental real estate property. Petitioner’s claimed
deductions attributable to the rental use of the Hallwood
property in 1997 included: (1) Cleaning and maintenance expense
of $565; (2) insurance expense of $369; (3) repairs expense of
$10,726; and (4) utilities expense of $2,401. On his Schedule E,
petitioner reported a total rental real estate loss of $11,436.
Section 7491 does not apply in this case because petitioner
has not complied with all applicable substantiation requirements,
including those of section 274(d). Sec. 7491(a)(2)(A).
Respondent disallowed all of petitioner’s Schedule C
expenses because he had not established that he was in a trade or
business and that the expenses were expended for the purposes
designated.
Section 162(a) allows a deduction for all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business. To be deductible as a
business expense, the expenditure must relate to activities which
constitute the current carrying on of an existing trade or
business. Corbett v. Commissioner, 55 T.C. 884, 887 (1971).
Whether activities carried on by an individual can be
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