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Discussion
In general, there is “allowed as a deduction all the
ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business”. Sec.
162(a).6 It is axiomatic that expenses “allowed as a deduction”
under section 162 are expenses paid or incurred in carrying on
the trade or business of the taxpayer who claims entitlement to
those deductions.
In this case, petitioners claim that Malone Music is
petitioner’s trade or business, and their Federal income tax
return for each year in issue (as well as other years not before
the Court) reflects this claim as income and deductions
attributable to Malone Music are included on a Schedule C
included with each of those returns. In addition to other
grounds advanced for disallowing the deductions claimed on those
Schedules C, respondent takes the position that Malone Music, if
a trade or business, is not petitioner’s trade or business, but
the trade or business of one or more of the Malone children.7
Resolving the dispute between the parties on this point requires
6 Petitioners rely exclusively upon sec. 162 in support of
the deductions here under consideration.
7 In his answer, respondent alleges that “Malone Music is
not an activity engaged in by petitioners”, but rather by H and
R. In his opening statement respondent’s counsel noted that
Malone Music “wasn’t even petitioners”, but “conducted by” one or
more of the Malone children.
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Last modified: May 25, 2011