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working phone. This letter is dated August 17, 2004. Based upon
the lack of substantiation as to deduction, we must sustain the
determination with respect to the telephone expenses.
With respect to the commissions and fees expenses,
petitioners testified at trial that this deduction was due to an
error made by their C.P.A. Accordingly, with no evidence in the
record to the contrary, we sustain respondent’s determination on
this issue.
2003 Schedule C Expenses
As stated in the 2003 notice of deficiency, respondent
disallowed petitioners’ claimed Schedule C deductions for
employee benefits programs and legal and professional services
expenses because they failed to establish that the “expenses
shown on [their] tax return were paid or incurred during the
taxable year and that the expenses were ordinary and necessary to
your business.” Respondent disallowed petitioners’ claimed
deductions for repairs, travel, and other expenses because they
“did not substantiate these reported expenses.”
As previously stated, section 162 allows “as a deduction all
the ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business”. Sec. 162(a);
Deputy v. duPont, 308 U.S. at 495.
With respect to the legal and professional fees, Mr. Nwankwo
testified that these costs stemmed from citations that he
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