- 5 - business in 2003 and asserts he is entitled to deduct the car and truck expense of $3,977 and the labor expense of $7,070 under section 162 and depreciation of $3,479 for the use of the Ford Taurus under section 167. Section 162(a) allows a deduction for the ordinary and necessary expenses of carrying on a trade or business. For a taxpayer to deduct expenses under section 162(a), the expenses must relate to a trade or business functioning at the time the expenses are incurred. Hardy v. Commissioner, 93 T.C. 684, 686 (1989), affd. in part and remanded in part per order (10th Cir., Oct. 29, 1990). A taxpayer is not carrying on a trade or business under section 162(a) until the business is functioning as a going concern and performing the activities for which it was organized. Richmond Television Corp. v. United States, 345 F.2d 901, 907 (4th Cir. 1965), vacated and remanded on other grounds 382 U.S. 68 (1965). Carrying on a trade or business requires a showing of more than initial research into or investigation of business potential. Dean v. Commissioner, 56 T.C. 895, 902 (1971); McKelvey v. Commissioner, T.C. Memo. 2002-63, affd. 76 Fed. Appx. 806 (9th Cir. 2003). Business operations must have actually commenced. McKelvey v. Commissioner, supra. Petitioner has the burden of proving he began operating his software development business in 2003. See Rule 142(a).Page: Previous 1 2 3 4 5 6 7 8 9 NextLast modified: November 10, 2007