- 7 -- 7 - tax for the year at issue. Petitioner presented no evidence establishing that the $9,363 of unreported income is not subject to self-employment tax. Accordingly, we hold that petitioner is liable for self-employment tax on the unreported income. Respondent is sustained on this issue. 3. Schedule C--Business Expense Deductions Deductions are a matter of legislative grace, and the taxpayer bears the burden of proving the entitlement to any deduction claimed. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). A taxpayer is required to maintain records sufficient to establish the amount of his or her deductions. Sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs. Section 162(a) allows a taxpayer to deduct ordinary and necessary business expenses paid or incurred during the taxable year in carrying on any trade or business. To be “ordinary” the transaction which gives rise to the expense must be of a common or frequent occurrence in the type of business involved. Deputy v. Du Pont, 308 U.S. 488, 495 (1940). To be “necessary” an expense must be “appropriate and helpful” to the taxpayer’s business. Welch v. Helvering, supra at 113. Additionally, the expenditure must be “directly connected with or pertaining to the taxpayer’s trade or business”. Sec. 1.162-1(a), Income Tax Regs. Pursuant to section 262(a), no deduction is allowed for personal,Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011