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Bed and Breakfast and Writing Activity Deductions
Petitioners also deducted expenses related to a B&B that
they listed as their principal trade or business on Schedule C,
Profit or Loss from Business, for 1997. Petitioners called the
B&B, “Angel’s Rest Arrowhead Ranch - Fly In Bed And Breakfast”
and listed related gross receipts of $649 and expenses of
$19,158.4 Petitioners allowed Mr. Lofstrom’s daughter and her
family to use the B&B rent-free for an unspecified period of time
that same year. Petitioners failed to introduce any evidence
that they rented the B&B to anyone else.
In addition, petitioners deducted expenses for
Mr. Lofstrom’s writing activities in 1997 and 1998.
Specifically, petitioners deducted $1,664 for travel expenses and
writing supplies in 1997 and $8,413 in 1998.
Respondent mailed petitioners a deficiency notice on
December 20, 2002, disallowing their $29,000 alimony deduction
for 1997, B&B-related deductions for 1997, and writing activity
deductions for 1997 and 1998. Petitioners timely filed a
petition with the Court.
Discussion
We must decide whether Mr. Lofstrom’s transfer of a contract
for deed constitutes deductible alimony. We must also decide
4Of this amount, $12,622 is depreciation expenses, which
petitioners concede.
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