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called for petitioner’s brother to perform cosmetology services
and to refer his clients to petitioner for sclerotherapy
treatment of varicose veins.
Petitioner argues that he conducted his medical practice at
the Sherman Oaks Property as a part of the business activity of
the Skin Service Club. Petitioner further argues that, despite
the fact that the Skin Service Club is a corporation,
petitioner’s rent payments for the years at issue were deductible
on petitioner’s Schedule C as ordinary and necessary business
expenses relating to petitioner’s personal medical practice. On
the other hand, respondent argues that petitioner was not
involved in any business activity at the Sherman Oaks Property
during the years at issue, and therefore petitioner’s rent
payments were not incurred to carry on a trade or business under
section 162. Respondent further argues that the rent payments
were in actuality a redistribution of income from petitioner, who
was in the highest tax bracket, to his mother, who was in a lower
tax bracket. We agree with respondent.
We note that a “deduction is a matter of legislative grace
and that the burden of clearly showing the right to the claimed
deduction is on the taxpayer.”4 INDOPCO, Inc. v. Commissioner,
503 U.S. 79, 84 (1992); see also Rule 142(a). Therefore,
4 The examination commenced before July 22, 1998.
Accordingly sec. 7491 burden of proof and production standards
are not applicable. See sec. 7491.
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