- 7 - 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.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011