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Petitioner testified that petitioners owned 100 percent of
all but one of the 21 S corporations listed on the Schedule E
attached to their 1995 tax return and that all these S
corporations were involved in real-estate development or
management activities. Petitioner offered no testimony, and the
record otherwise contains no evidence, regarding Creekside Manor,
listed as a construction business on the Schedules C attached to
petitioners’ 1995 and 1996 returns, or Citation Skymaster, listed
as a construction business on the Schedule C attached to
petitioners’ 1996 return.
The sparse evidence introduced by petitioners would not be
“sufficient upon which to base a decision on the issue”, H. Conf.
Rept. 105-599, supra at 240, 1998-3 C.B. at 994, as to whether
petitioners were individually engaged in a trade or business,
within the meaning of section 162, with respect to which the tax
payments would represent ordinary and necessary expenses.4 In
the first instance, assuming for sake of argument that
petitioners devoted significant time and energy to the many S
corporations that they owned, such activity would not necessarily
constitute a trade or business of petitioners. See Whipple v.
United States, 373 U.S. 193 (1963); Bell v. Commissioner, 200
F.3d 545, 547 (8th Cir. 2000), affg. T.C. Memo. 1998-136. The
4 Even if the burden of proof were placed on respondent, we
would decide the issue in his favor based on the preponderance of
the evidence.
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