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Petitioners resided in Carson, California, at the time they
filed the petition. Some of the facts have been stipulated and
are so found.
Discussion
Petitioner Frederick Smith, Jr. (petitioner) worked as a
television engineer for approximately 25 years. In 1997, he also
maintained a television production and web design sole
proprietorship doing business under the name of “Off The Field
Productions” (OTFP). Petitioners claimed a loss of $23,236 on
Schedule C, Profit or Loss From Business, attached to their
Federal income tax return for 1997, from the OTFP activity.
Mrs. Smith worked part-time for OTFP in 1997 performing
office work, such as bookkeeping. She was also employed full-
time as an analyst for the University of California, Los Angeles,
Medical Center.
OTFP produced a television show pilot in 1997 for Jill
Johnson (Ms. Johnson) called “The Fantasy Sports Zone” (FSZ).
Petitioner customarily prepared a proposed budget for a client as
an estimate of the cost of a project. The budget for the FSZ
show was $65,000.
Petitioners maintained an “Itemized Category Report” of
income and expenses for OTFP. The Report reflects the following
three payments in 1997 relating to the FSZ show:
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