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OPINION
Schedule C Deductions
Petitioners maintain that all deductions were part of a
legitimate business whose primary objective was to earn a profit.
Respondent’s position is that the contested deductions are
unsubstantiated personal expenses.
Section 162(a) allows deductions for ordinary and necessary
expenses paid or incurred in carrying on a trade or business.
Generally, no deduction is allowed for personal, living, or
family expenses. Sec. 262.
In this case, petitioner’s agreement with his stepdaughter
was in furtherance of the personal desires of both parents and
daughter that Jennifer should prepare herself for a career as a
ballerina. Petitioners have not shown that payments for one’s
own daughter’s training and education conditioned upon the
commitment of her future earnings are ordinary and necessary
business expenses.
Generally, under section 183(a) and (b) individuals are not
allowed deductions attributable to an activity “not engaged in
for profit” except to the extent of gross income generated by the
activity. Section 183(c) defines an activity “not engaged in for
profit” as any activity other than one for which deductions are
“allowable * * * under section 162 or under paragraph (1) or (2)
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Last modified: May 25, 2011