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$15,503, which is one-half of the two joint liabilities paid off
by the proceeds of the CWSC 401(k) distribution, plus the $10,000
check given to Mr. Seidel from the proceeds of the CWSC 401(k)
distribution in compliance with the Stipulation and Order.
Therefore, petitioner is liable for the tax on the
additional portion of the distribution in the amount of $21,467,
which she has not reported and of which she was the beneficiary
and alternate payee.
As stated in Powell v. Commissioner, supra at 498-499:
Our conclusion is not affected by the fact that initially
the entire distribution was made to [petitioner]. We think
[she] received the distribution * * * on behalf of the
community and that [her] later payment to [Mr. Seidel], [by
way of cash and relief of joint liabilities], was a transfer
to [him] of funds that at all times belonged to [him].
2. Schedule C Deductions for the Port of Mystery
Under section 162, a taxpayer may deduct the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on his or her trade or business. A taxpayer is engaged
in a trade or business if the taxpayer is involved in the
activity (1) with continuity and regularity, and (2) with the
primary purpose of making a profit. 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).
Petitioner has the burden of proving that she was engaged in
a trade or business, i.e., Port of Mystery, and that she is
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