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preparation expense, and professional business expense.
Respondent initially allowed $4,306.17 of that amount and later
conceded an additional $314.94, leaving $24,510.89 in dispute.
At trial, petitioners introduced: (1) A receipt for $447
related to Getotis.com; (2) receipts totaling $888.75 from Pre-
Paid Legal Services, Inc.; (3) a Form 1099-MISC, Miscellaneous
Income, indicating that petitioner paid his son, Roderick, $5,460
of nonemployee compensation;2 (4) receipt stubs and checks drawn
on petitioner’s account to Roderick; and (5) a Form 1096, Annual
Summary and Transmittal of U.S. Information Returns, used to
transmit the Form 1099-MISC to the Internal Revenue Service.
With respect to the receipt for $447, it is not clear from
the document what type of expense this represents or how
Getotis.com relates to the real estate consulting business.
Petitioners offered no testimony on this matter, and, therefore,
they have failed to prove the $447 is an ordinary and necessary
business expense.
With respect to the receipts for $888.75 from Pre-Paid Legal
Services, Inc., legal fees generally are deductible if they are
sufficiently connected with the taxpayer’s trade or business.
See, e.g., Kenton v. Commissioner, T.C. Memo. 2006-13.
2 Petitioners did not report any amount as wage expense on
their Schedule C. It appears that petitioners instead reported
the alleged payments to their son as a component of other
expenses.
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Last modified: May 25, 2011