Michael D. and Christine R. Alexander - Page 8

                                        - 7 -                                         
          connection with the operation of the business.  Sec. 162(a); see            
          also Commissioner v. Lincoln Sav. & Loan Association, 403 U.S.              
          345, 352 (1971); FMR Corp. & Subs. v. Commissioner, 110 T.C. 402,           
          414 (1998).  Respondent does not dispute that the tree farm,                
          seamstress business, and dog-breeding business each qualifies as            
          a trade or business for Federal income tax purposes.  Thus, we              
          address only whether the expenses are ordinary and necessary; and           
          whether they were paid or incurred in connection with the                   
          respective businesses.                                                      
          1.   Interest Expense on the Home Equity Loan                               
               As a preliminary matter, we note that petitioners claimed an           
          interest expense deduction of $5,951, which respondent disallowed           
          in full.  Petitioners introduced a Form 1098, Mortgage Interest             
          Statement, which shows $5,871 of mortgage interest paid.                    
          Petitioners did not introduce any evidence with respect to the              
          remaining $80 of the claimed interest expense deduction.  We                
          therefore consider that petitioners have conceded that amount of            
          the adjustment.  See Nicklaus v. Commissioner, 117 T.C. 117, 120            
          n.4 (2001); Korchak v. Commissioner, T.C. Memo. 2005-244 n.6.               
          Respondent’s determination is sustained to the extent of $80.               
               With respect to the remaining $5,871 of interest expense,              
          the parties agree this amount is deductible.  They disagree                 
          whether it is an itemized deduction, or a trade or business                 
          expense.  The distinction is important because section 68(a)                

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011