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C. Rent/Lease Vehicles/Machinery/Equipment
Respondent’s notice of deficiency disallowed the amount
petitioner claimed on his Schedule C for renting or leasing of
vehicles, machinery, and equipment, $187,004. The notice of
deficiency stated that this cost was disallowed because
petitioners did not provide information to support the deductions
and did not establish that the expenses were ordinary and
necessary. Petitioners support this deduction with a stipulation
listing checks and a record of check stubs.
We note that the checks paid from the beginning of the year
through July 21, 2001, were paid out of the B&B account while the
checks paid after that date were paid out of the BBT account.
All checks dated from July 31, 2001, through the end of 2001 were
issued from the BBT account. BBT did not file a Form 1065 for
2001, nor did B&B Complex Trust, the 99-percent partner of BBT,
file a Form 1041 for 2001. Petitioner cannot claim a deduction
on his Schedule C for the rent/lease of vehicles, machinery, and
equipment if those expenses were in fact incurred by BBT. In the
light of all the evidence, we hold that the deductions on
Schedule C are limited to only those expenses stipulated by the
parties to have been paid out of the B&B account.
D. Depreciation
Respondent’s notice of deficiency disallowed the amount
claimed on Schedule C for depreciation, $407,075. The notice
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