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interesting and complicated area of the law, but of no importance
in determining petitioner’s tax liability.
No matter how you look at it, petitioner had only U.S.
source income. One hundred percent of petitioner’s expenses,
losses, and other deductions will be allocated to his U.S. source
income. No apportionment is possible because he has only one
“grouping” of income, U.S. source income. He ends up with U.S.
source taxable income, only. With respect to determining
petitioner’s tax liability for 2000, section 861 is superfluous.
The Court hopes that as long as all of petitioner’s income is
U.S. source income he will no longer be “confused”, purposely or
otherwise, by section 861.
Petitioner’s Business Expenses
Petitioner has made no argument that the burden of proof
shifting provisions of section 7491(a)(1) apply to this case, nor
has he offered any evidence that he has complied with the
requirements of section 7491(a)(2).
Petitioner alleged at trial that he is entitled to
additional deductions for business expenses, including
transportation expenses and a computer. Petitioner, however, had
no business records and relied solely on his testimony as
evidence.
Section 162 generally allows a deduction for ordinary and
necessary expenses paid or incurred during the taxable year in
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