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3. Schedule E Expenses
Section 212(2) allows a deduction for all the ordinary and
necessary expenses paid or incurred during the taxable year for
the management, conservation, or maintenance of property held for
the production of income, including real property. Sec. 1.212-
1(h), Income Tax Regs.
Further, section 167 generally allows as a depreciation
deduction a reasonable allowance for the exhaustion and wear and
tear of property used in a trade or business, or property held
for the production of income.
However, as previously stated, a taxpayer is required to
maintain records sufficient to establish the amount of his income
and deductions. Sec. 6001; sec. 1.6001-1(a), (e), Income Tax
Regs. In order for a taxpayer to be entitled to a deduction
under section 212, he must substantiate his deductions by
maintaining sufficient books and records.
Petitioners claim that when the Millers vacated the trailer
in 2002, they took the carpeting, furniture, refrigerator, and
stove. Petitioners testified that they replaced these items in
taxable year 2002.
Unfortunately, the record lacks any receipts or other
documentary evidence that would provide any substantiation or a
rational basis upon which the Court could allow any deduction and
depreciation with respect to the rental property. Further, we
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Last modified: May 25, 2011