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costs under section 263A its costs of $17,532 for labor and
materials, and it may not reduce gross income by $17,532 in 1994.
We conclude that AIM had cost of goods sold of $85,883 for 1994.5
D. Labor by High School Students
Respondent contends that petitioner had constructive
dividends of $442 in 1994, $40 in 1995, and $243 in 1996 and that
AIM may not deduct these amounts because petitioners did not
substantiate the amounts petitioner paid to high school students
to maintain the lawn and premises at the Whittington property in
the summers of the years in issue. We disagree. Petitioner
credibly testified, and corroborated by contemporaneous records,
that he paid high school students $442 in 1994, $40 in 1995, and
$243 in 1996 to maintain AIM’s premises.
Respondent points out that in Park v. Commissioner, T.C.
Memo. 1994-343, we held that the taxpayer could not deduct labor
expenses because he had no records to substantiate those
payments. We distinguish Park because, here, the contemporaneous
expense reports that petitioner used to claim reimbursement
corroborate his testimony. The issue in Park was whether to
estimate under Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir.
1930), the amount the taxpayer paid for office help. Here, we
know the exact amounts of the labor expenses because petitioners
5 Respondent concedes that AIM may reduce its 1995 gross
receipts by $17,532 for costs of goods sold.
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