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the Schmidts to provide property insurance covering the farmhouse
or other improvements on the property. The property insurance is
an ordinary and necessary business expense of Hillside Dairy (the
owner of the property) and not a personal, family, or living
expense of the Schmidts. We hold, therefore, Hillside Dairy is
entitled to deduct the insurance expenses as claimed in 1996 and
1997.
b. Utilities
Hillside Dairy deducted utilities expenses of $2,567 in
1995, $2,439 in 1996, and $2,557 in 1997. Utilities expenses may
be deductible under section 162(a) if the expenses incurred are
ordinary and necessary in carrying on a trade or business.
Vanicek v. Commissioner, 85 T.C. 731, 742 (1985); Sengpiehl v.
Commissioner, T.C. Memo. 1998-23; Green v. Commissioner, T.C.
Memo. 1989-599.
Here, the farm lease did not contain any provisions
regarding the utilities for the farmhouse. Petitioners did not
produce any utility bills, canceled checks, or testimony to
identify that portion, if any, of the utilities expenses related
to the corporation’s business. We have no basis for making any
allocation of the expenses. Thus, petitioners have failed to
establish that Hillside Dairy is entitled to any deduction for
utilities expenses.
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