- 31 -
his nonqualified stock options and to acquire other stock. The
costs of acquiring stock, a capital asset, are capital in nature
and are not currently deductible but instead are included in the
stock’s tax basis. See Woodward v. Commissioner, 397 U.S. 572,
575 (1970); Lychuk v. Commissioner, 116 T.C. 374, 388-389 (2001);
Pappas v. Commissioner, T.C. Memo. 2002-127; see also secs. 1012,
1221(a). Therefore, we find that petitioners are not entitled to
deduct the “Cash Pay” and “Other” expenses.
As described above, respondent met his burden of proving
that petitioners are entitled to itemized deductions of only
$243,363 and miscellaneous itemized deductions of only $84,581.
However, petitioners argue that they are entitled to deduct the
claimed expenses in full in 2000 because respondent allowed them
to deduct similar expenses in 1999.18 Petitioners’ argument is
without merit. Each taxable year stands alone, and respondent
may challenge in a succeeding year what was condoned or agreed to
in a former year. Rose v. Commissioner, 55 T.C. 28, 31-32
(1970); Jeanmarie v. Commissioner, T.C. Memo. 2003-337; Boatner
18 Petitioners also argue that respondent cannot challenge
their itemized deductions because the Court admitted into
evidence Exhibit 38-P. Exhibit 38-P was offered by petitioners
as a summary of their arguments. Similar to their argument
regarding Exhibit 42-R, discussed supra pp. 15-16, petitioners’
argument is based on a misunderstanding of the Court’s
evidentiary ruling. The admission of Exhibit 38-P into evidence
does not establish the truth of petitioners’ assertions made in
that exhibit, nor does it preclude respondent from contesting
those assertions.
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011