John C. and Joan F. Stukes - Page 5




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          report any farm income; the entire reported loss was due to                 
          claimed expenses.  The expenses petitioners reported on Schedule            
          F were:  Car and truck expenses ($3,227), chemicals ($850),                 
          custom hire ($9,500), depreciation ($3,449), fertilizers ($550),            
          gasoline ($350), insurance ($1,200), repairs and maintenance                
          ($425), supplies purchased ($150), taxes ($250), and tractor                
          repairs ($165).                                                             
               In the notice of deficiency, respondent determined that                
          petitioners did not substantiate any of the items reported on               
          Schedule F and therefore none were allowable.  At trial,                    
          respondent conceded petitioners’ entitlement to deduct $8,186 for           
          custom hire, $1,850 for depreciation, $126.48 for taxes, and $350           
          for gasoline, and petitioners conceded that $1,850 of claimed               
          depreciation expense was not allowable.                                     
          A taxpayer who is carrying on a trade or business generally                 
          may deduct ordinary and necessary expenses paid or incurred in              
          connection with the operation of the business.  Sec. 162(a); see            
          also Commissioner v. Lincoln Sav. & Loan Association, 403 U.S.              
          345, 352 (1971); FMR Corp. & Subs. v. Commissioner, 110 T.C. 402,           
          414 (1998).  Respondent does not dispute that petitioners’                  
          farming activity qualifies as a trade or business and that the              
          expenses from this activity, if incurred, were ordinary and                 
          necessary.  Thus, we need address only whether the claimed                  








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