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supra. The reasoning of those courts is equally applicable here.
A. Attempted Deduction of Personal Consumption Expenses
After attending the NTS seminars, petitioners thought that
once they had conveyed their personal assets, like cars and
residences, to the OMK trusts, the trusts could deduct personal
consumption expenses such as fire insurance, utilities, and
repair and maintenance--indeed, almost everything except the
costs of food consumed at home. “It is fundamental to our income
tax regime that personal consumption expenditures--food,
clothing, travel, education, entertainment--do not generate
income tax deductions unless they are somehow inextricably linked
to the production of income.” Schulz v. Commissioner, supra at
492-493. Personal expenses do not become deductible expenses of
trust administration merely because title to property is placed
in the trust. Id. There must be a nexus between the expense and
the business conducted by the trust to qualify for a tax
deduction. Conversely, legitimate expenses of a taxpayer’s
business are deductible regardless of whether the taxpayer is an
individual or a trust. United States v. Buttorff, 761 F.2d 1056,
1060 (5th Cir. 1985).
The OMK trusts did not engage in any trade or business.
Thus, the claimed deductions are not deductible under section
162. Transferring property into the trusts did not aid in the
production of income, nor did it alter management activity.
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