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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)
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