Oleg Kolomiyets, T. C. Sum. Op. 2024-8, filed 6/6/24, gets reminded of the above-captioned truism by STJ Zachary S. (“Highrise”) Fried. While pulling down six figures as a full-time, commission-based loan processor, Oleg also ran Millhouse Advisors, a sole proprietorship engaged in real estate advisory services (nature of which unexplained).

Millhouse hemorrhaged cash, losing over $100K via Section 162 ordinarys-and-necessarys, according to Oleg’s Sched C. And Oleg has bank and credit card statements.

He doesn’t have “…separate books of account for Millhouse, nor did he maintain a bank account in the name of the business. Petitioner maintained a personal checking account with USAA Federal Savings Bank (USAA) and two credit card accounts with USAA.” T. C. Sum. Op. 2024-8, at p.2.

Unhappily, “According to petitioner, he is entitled to a deduction for one-half of the expenditures shown on the bank and credit card account statements. However, petitioner did not connect the expenditures shown on the bank and credit card statements to deductions for business expenses claimed on his return. Moreover, petitioner failed to explain how the items purchased related to, let alone were ordinary and necessary business expenses of, Millhouse or any other trade or business. Finally, petitioner presented no evidence that would satisfy the section 274(d) substantiation requirements for expenses related to car and truck expenses. It follows that petitioner is not entitled to deduct these expenses.” T. C. Sum. Op. 2024-8, at p. 4.

The Section 6662 five-and-ten understatement chop applies.

Takeaway- You won’t get a toaster any more, but some banks offer cash for a new business account if you use it. A good idea. And keep those books and records. A little time with elementary accounting software will save much grief. And tell ’em Oleg sent ya.