Paul L. Caron

Wednesday, April 19, 2006

Tax Court Disallows Business Expense Deductions Claimed by Lehigh Prof

Tax_court_25KanofskyIn Kanofsky v. Commissioner, T.C. Memo. 2006-79 (4/18/06), the Tax Court sustained the Service's disallowance of business deductions claimed by Alvin S. Kanofsky, a full-time physics professor at Lehigh University:

For each year in issue, petitioner filed a Form 1040, U.S. Individual Income Tax Return, showing zero taxable income and no tax due. On a Schedule C attached to each of those returns, petitioner listed as his principal business or profession "research and development" and as the name of his business "A.S.K. Enterprises". Only the 1999 and 2000 Schedules C listed a business address, which was 30 E. 3d St., Bethlehem, PA 18015 (the Bethlehem property). All of the Schedules C report zero gross receipts and zero gross income, and they report the following amounts of total expenses (and resulting losses):

      Year           Schedule C Expenses          
      1996                   $72,786
      1997                    75,388
      1998                    80,675
      1999                    85,845
      2000                    80,020

Neither petitioner's exhibits nor his testimony is sufficient to establish that he was engaged in a trade or business during the 1996- 98 period. Moreover, petitioner's 1996 98 Schedules C reporting zero gross receipts from A.S.K. Enterprises support a finding that he was not engaged in any trade or business during that period....

Petitioner's evidence of business use for his three properties is no more convincing for 1999 and 2000 than it is for 1996-98.

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I'll just bet he didn't consult a tax lawyer.

Posted by: The NJ Annuitant | Apr 19, 2006 5:59:27 PM

I'm not an accountant, but I think the claim of zero receipts and income didn't help him very much, did it?
$80,000 of losses and no income is an unusual business, even by professorial standards. At least he wasn't a tax professor . . .

Posted by: Michael A. Livingston | Apr 19, 2006 7:58:11 PM