Danvis S. and Sheryl S. Smith - Page 8

                                        - 7 -                                         
          were stamped received by the Colorado Secretary of State on                 
          December 13, 1995.  The corporation never received an employer              
          identification number from the Internal Revenue Service and never           
          filed Federal income or employment tax returns.  Petitioner, the            
          sole shareholder, intended to use this corporation for a number             
          of separate activities:  First, the corporation was meant to                
          establish a vending machine route.  Second, petitioner hoped the            
          corporation would take over his table pad business.  Third,                 
          petitioner thought that he could “pay” the corporation to provide           
          grading services needed for his Apollo Group employment, services           
          which he in turn would personally provide.  Finally, petitioner             
          thought that he could “pay” the corporation rent for use of his             
          residence in grading papers and other activities, while                     
          petitioner and his wife personally owned the residence.  With               
          respect to the latter two activities, petitioner claimed                    
          deductions on the 1995 return for alleged payments to the                   
          corporation, which had been incorporated on or about December 13            
          of that year.  Petitioner never transferred any funds to the                
          corporation or to an account designated for corporate use.                  
               A taxpayer may deduct the ordinary and necessary expenses              
          paid or incurred during the taxable year in carrying on a trade             
          or business, including the trade or business of being an                    
          employee.  Sec. 162(a); Primuth v. Commissioner, 54 T.C. 374,               
          377-378 (1970).  A taxpayer, however, generally must keep records           

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  Next

Last modified: May 25, 2011