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Respondent determined that various expenses were not
substantiated, were not shown to be ordinary and necessary to
petitioner’s business, or were personal in nature and therefore
not deductible.
Discussion
Section 162 allows a deduction for all ordinary and
necessary expenses incurred in carrying on a trade or business if
the taxpayer maintains records or other proof sufficient to
substantiate the expenses.7 Secs. 162(a), 6001; sec. 1.6001-
1(a), Income Tax Regs. To be engaged in a trade or business 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. Sec. 162; see
Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987); Antonides v.
Commissioner, 893 F.2d 656, 659 (4th Cir. 1990), affg. 91 T.C.
686 (1988).
Renaissance has been found to be an illegal pyramid scheme
that offered no product or service other than the dissemination
of fraudulent tax advice. The parties have stipulated the
deductions claimed with regard to the Renaissance activity;
however, respondent contends that the Renaissance activity was
not a trade or business.
7 Sec. 7491(a), concerning burden of proof, is not
applicable here because petitioners have not satisfied the
substantiation requirements. Sec. 7491(a)(2)(A).
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