U.S. Tax Court Memorandum Decision Partially Upholds Taxpayer’s Business Expense Deductions

The U.S. Tax Court, in a memorandum decision, ruled that the taxpayers’ software development and most of their home construction activities were conducted for profit, allowing deductions for business expenses to the extent substantiated. The taxpayers, a married couple with self-taught skills and experience, operated multiple ventures through their LLC, including developing an application addressing internet addiction, constructing homes on a large rural property, and briefly running a mulching business. They filed petitions seeking redetermination of federal income tax deficiencies for 2017-2019 after the IRS disallowed their claimed business expense deductions. After analyzing the nine regulatory factors under IRC §183, ...