Yuri G. Glotov - Page 5




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          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).                             








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