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Memorandum Opinion of the Court; Radding v. Commissioner, T.C.
Memo. 1988-250; sec. 1.165-1(d)(2)(i), Income Tax Regs.
D. Business Expenses
Petitioner received nonemployee compensation of $1,427 from
R.W. Durham and $31 from American Network Ins. Co. in 1997.
Petitioner claims that he operated an insurance business under
the name of Kellum & Associates in 1997 and that the $1,458
represents gross receipts or sales reportable on a Schedule C,
Profit or Loss From Business. Petitioner claims $2,440 in
business expense deductions from his insurance activity and
submitted an assortment of receipts and credit card statements of
various expenses including car rentals, restaurant receipts for
meals, and a cell phone.
Section 162 provides that a taxpayer who is carrying on a
“trade or business” may deduct ordinary and necessary expenses
incurred in connection with the operation of the business. To be
engaged in a trade or business within the meaning of section 162,
“the taxpayer must be involved in the activity with continuity
and regularity and * * * the taxpayer’s primary purpose for
engaging in the activity must be for income or profit”.
Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987). If the
taxpayer is not engaged in a trade or business under section 162,
the taxpayer may generally deduct the expenses related to an
activity “not engaged in for profit” only to the extent of the
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