Opinion ID: 3063594
Heading Depth: 2
Heading Rank: 2

Heading: The $5,000 Deduction

Text: 3 The Basses’ argument regarding the burden of proof does not affect our analysis because the tax court clearly held that the record in this case supported the application of the additions to tax even if the burden of production were on the Commissioner. 8 The Basses argue that the tax court clearly erred in finding that, because they were not entitled to a $5,000 deduction for the partnership investment, that amount did not affect the applicability of the tax additions imposed. Whether an expenditure is deductible as an ordinary and necessary business expense is a question of fact that we review for clear error. Bone v. Comm’r, 324 F.3d 1289, 1293 (11th Cir. 2003). The Basses were not entitled to deduct the $5,000 they invested in Cal-Neva Partners because it was a capital expenditure rather than a business expense. “As a general rule, expenditures paid or incurred in carrying on a trade or business are deductible as ordinary and necessary business expenses, but capital expenditures are not.” Vinson v. Comm’r, 621 F.2d 173, 174 (5th Cir. 1980) (citing 26 U.S.C. §§ 162(a) and 263(a)). “[A] partner’s interest in the partnership is itself a capital asset, subject to gain or loss like any other capital asset.” Stackhouse v. United States, 441 F.2d 465, 467 (5th Cir. 1971). Mr. Bass testified that the $5,000 payment to Cal-Neva Partners was an investment for his partnership interest in the partnership. Accordingly, the tax court did not clearly err in finding that the investment did not affect the applicability of tax additions under 26 U.S.C. §§ 6653(a)(1), (a)(2), and 6661.