- 7 -
this alleged business on their returns for 2000 and 2001.
The mere reporting of this activity does not prove its
existence. Other than their testimony, and a series of
documents generated by them, there is no evidence in the
record to establish that there even was an activity.
Petitioners presented no checks, receipts, or any other
third party documents to prove they conducted a business.
They claimed to have an office in Colombia, but again, they
only presented computer generated accounting records to
support the existence of their Colombia operation. Further,
there was no evidence presented regarding the source of the
capital necessary to operate in Colombia, or how it was
transmitted to that location. They presented no checks,
wire transfers, or other physical evidence to establish
funding. Petitioners conceded a portion of their claimed
Colombia “office” expense when respondent determined that
the location of the alleged office was an apartment
building. Thus, before the Court begins examining the
various factors associated with activities entered into for
profit, the Court must first determine if there was in fact
any activity to judge. Respondent asserts that it is
altogether inconceivable that petitioners would be without a
single third party record if they in fact operated a
business in two separate countries.
Section 183(a) provides in general that, in the case of an
activity engaged in by an individual, if such activity is not
engaged in for profit, no deduction is allowable except for
deductions that are otherwise allowable without regard to whether
the activity is engaged in for profit, and/or to the extent of
the gross income from the activity.
Section 183, therefore, presupposes the existence of an
activity. As noted above, in the notice of deficiency,
respondent disallowed the claimed deductions on the ground it had
not been established that the expenses were incurred and paid.
As pointed out by respondent on brief, no statements, bills,
Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011