Bill J. Malone, Jr. and Sarah J. Malone - Page 9

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               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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