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Deductions Claimed on the Schedule C
In general, a taxpayer is entitled to a deduction for
ordinary and necessary expenses paid or incurred in carrying on a
trade or business. See sec. 162(a). Needless to say, to be
entitled to a deduction for trade or business expenses, the
taxpayer must actually be carrying on some trade or business.
Petitioner’s 1998 return includes a Schedule C for a
business identified as “MFG Heat Equipment”. At trial,
petitioner’s description of the business activity identified on
the Schedule C was vague. At times, his testimony related to
activities that took place years before and involved the patent.
At other times, he described an activity that he and his father
operated out of petitioner’s garage. According to petitioner,
the business consisted of acquiring used “heater pads”,
refurbishing them, and reselling them. Once again, petitioner’s
trial testimony is contradicted by the testimony he gave at the
deposition.
During the deposition petitioner made it clear that he
assigned or otherwise lost any ownership rights to the patent
prior to 1998. He was also asked about his employment during
1998, including his employment with Union and any other
businesses he might have been involved with or conducting. The
following exchange occurred:
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Last modified: May 25, 2011