Emmanuel & Cecilia Abloso - Page 7

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          The rent or lease expense was based primarily on petitioners’               
          monthly rent of $550 for their personal residence.                          
               In the notice of deficiency, respondent disallowed the                 
          Schedule C deductions claimed by petitioners.  However, to the              
          extent of the income realized from the activity, respondent                 
          allowed certain of these expenses as miscellaneous itemized                 
          deductions.1  Respondent further determined that petitioners are            
          liable for an accuracy-related penalty under section 6662(a).               
          Discussion                                                                  
               In general, section 162(a) allows a deduction for all                  
          ordinary and necessary expenses paid or incurred during the                 
          taxable year in carrying on a trade or business.  The term “trade           
          or business” is not precisely defined in the Internal Revenue               
          Code or the regulations promulgated thereunder; however, it is              
          well established that in order for an activity to be considered a           
          taxpayer’s trade or business for purposes of section 162, the               
          activity must be conducted “with continuity and regularity”, and            
          “the taxpayer’s primary purpose for engaging in the activity must           
          be for income or profit.”  Commissioner v. Groetzinger, 480 U.S.            
          23, 35 (1987).  Personal, living, or family expenses may not be             
          deducted.  Sec. 262(a).                                                     


               1  However, as the expenses allowed as itemized deductions             
          are less than the standard deduction, the deficiency here in                
          dispute takes into account the standard deduction.                          





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