- 10 - In addition to the rent and utilities expenses, petitioners deducted expenses for furnishing the North Indian Avenue and Ravenspur apartments during 1998 totaling $1,371. In the notice of deficiency, respondent disallowed the $1,371 on the ground that, although substantiated, the claimed amount did not constitute deductible ordinary and necessary business expenses. The Court first addresses petitioners’ entitlement to the deductions claimed for 1997 and 1998 relating to their residences (Vista Loma and Deepak) and next considers the deductions claimed for 1998 relating to the two rented apartments (North Indian Avenue and Ravenspur).5 Under section 162(a), a taxpayer is allowed to deduct all ordinary and necessary expenses paid or incurred in carrying on a trade or business. However, section 280A(a) generally disallows deductions with respect to the use of a dwelling unit that is used by a taxpayer as a residence during the taxable year, with certain exceptions. One of those exceptions applies to use of a home office. The home office exception, sec. 280A(c), provides: 5 Generally, the burden of proof is on a taxpayer to establish entitlement to deductions, which are a matter of legislative grace. New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). In certain circumstances, however, sec. 7491 shifts this burden of proof with respect to examinations of returns commencing after July 22, 1998. There is no evidence in the record regarding the date the examination of petitioners’ returns commenced, and petitioners do not contend that sec. 7491 applies. In any event, the Court decides this case without regard to the burden of proof.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011