- 36 -
nondeductible fees owing in connection with petitioner’s
divorce.15
Deductibility of Other 1992 Expenses
On his 1992 tax return, petitioner claimed “cost of goods
sold” of $925,500, consisting of $797,225 representing an offset
to the United Ready Mixed settlement proceeds and $128,275
representing other reductions or deductions.
While properly disallowing any cost of goods sold
reduction,16 respondent allowed business expense deductions for
$35,000 of the remaining $128,275 petitioner claimed as cost of
goods sold and disallowed the balance. To substantiate trade or
business expense deductions for the remaining $93,275 which he
wrongly claimed as a cost of goods sold, petitioner provided a
disbursements journal for the year 1992 (1992 disbursements
journal), which listed checks written during the year by category
of expense. The expense categories included: “Onyx”, “Mercedes”,
15Respondent has conceded that any legal fees petitioner
paid would be deductible as a trade or business expense under
sec. 162 would be deducted “above the line” in arriving at
petitioner’s adjusted gross income under sec. 62(a)(1). See,
e.g., Guill v. Commissioner, 112 T.C. 325 (1999).
16Petitioner has conceded that it was improper for him to
claim “cost of goods sold”. Petitioner was in the rental truck
and equipment business. Petitioner did not produce goods for
sale to customers. The expenses of engaging in an equipment
rental activity are not a cost of goods sold. The expenses may
be deductible as ordinary trade or business expenses under secs.
62(a)(1) and 162. Petitioner alleges that the amounts he
improperly claimed as cost of goods should constitute deductible
trade or business expenses.
Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 NextLast modified: May 25, 2011