Haas & Associates v. Commissioner

MEMORANDUM *

Michael Haas, Angela Haas, and Haas & Associates appeal the order of the United States Tax Court disallowing a $63,500 deduction on the Haas’s 1993 joint Federal tax return and denying to the taxpayers the recovery of litigation costs. See T.C. Memo.2000-183 and 117 T.C. No. 5 . The court determined that the $63,500 deduction for “transitional” accounting services was not an ordinary and necessary business expense under Section 162(a) of the Internal Revenue Code, as “Haas was an experienced accountant and had good relationships with the clients,” so “[t]he credible evidence does not establish the need for any such services.” Additionally, the court concluded that Haas was not entitled to litigation costs because he did not exhaust the administrative remedies available to him.

The Tax Court’s conclusions of law are reviewed de novo. Dykstra v. Commissioner, 260 F.3d 1181, 1182 (9th Cir.2001). Its conclusions of fact are reviewed for clear error. Schachter v. Commissioner, 255 F.3d 1031, 1033 (9th Cir.2001).

Section 162(a) generally allows a deduction for “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or…