- 6 - business expense relating to petitioner’s real estate investment business. Respondent argues that petitioner was not involved in any business activity with petitioner’s father during 1996, and therefore the $30,000 paid to petitioner’s father was not for the purpose of carrying on a trade or business under section 162. Respondent further argues that the $30,000 was in actuality a redistribution of tax liability. Petitioner’s father already had a Schedule C loss of $26,085 from his 7-Eleven store to offset the $30,000 while petitioner was able to gain a tax liability reduction of $9,717 by claiming a $30,000 expense against his total wages of $127,039. 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.”3 INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Rule 142(a). Therefore, petitioner must establish that the $30,000 paid to petitioner’s father was for the purpose of carrying on petitioner’s trade or business. Taxpayers are required to keep such permanent records as are sufficient to substantiate the amount and the purpose of any deductions. Sec. 6001; Higbee v. Commissioner, 116 T.C. 438, 440 (2001); sec. 1.6001-1(a), Income Tax Regs. Petitioner did not 3 Petitioner does not contend that sec. 7491(a) is applicable to this case.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011