I. FACTS 6－4
Walter Hodges wanted to begin to invest in the field of real estate. In spring 2009,he completed a plan for his business. During this time, he also attended a skill-improved class by paying $25,000. On December 30,2009, he purchased the property which is rented on March 2010.On his form of 1040 for 2009,he asked for a deduction of $29,000. But unfortunately, IRS declined the requisition of deduction for the reason that he wasn’t in a trade of business in 2009.he received the license for the business on November. II. ISSUES
The issue for decision is whether IRS should allow the deduction of $29，000 which include the cost of the training classes, automobile expenses, meals and entertainment, computer and software expenses, and supplies. III. CONCLUSIONS
With reference to §162(a) , § 195and precedent tax cases, we reach the final conclusion that the $29,000should not be deducted, though Walter Hodges began investing in the real estate market and had a completed plan in early 2009,he was not activated trade or business during 2009.
Section162 generally allows” a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. Such expenses must be directly connected with or pertain to the taxpayer’s trade or business that is functioning as a business at the time the expenses were incurred. “According to sec162, a tax payer is not carrying on a trade or business until the business is functioning as a going concern and performing the activities for which it was organized.in the case, Mr. Walter Hodges was active in his trade on March, 2010.So the expenses incurred in 2009 didn’t satisfy the requirements of section162. Taxpayer isn’t entitled to business deduction for expense associated with his real investment and rental business incurred and paid during year that he purchased rental property on next-to-last day of...