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Respondent determined a deficiency of $7,368 in petitioners’
1998 Federal income tax. After a concession by petitioners,1 the
issues for decision are: (1) Whether petitioners can deduct
interest paid on a home equity loan as an ordinary and necessary
business expense; (2) whether petitioners can deduct payments to
their son as wage expense; (3) whether petitioners can deduct
payments to their daughters as wage expense; and (4) whether
respondent is estopped from disallowing petitioners’ claimed wage
expense deductions.
Background
Some of the facts have been stipulated and are so found.
Petitioners Michael Alexander (Mr. Alexander) and Christine
Alexander (Mrs. Alexander) are married and resided in Bandon,
Oregon, at the time their petition was filed. Petitioners filed
a joint Federal income tax return for the taxable year 1998.
1. The Tree Farm
In 1990, petitioners purchased a parcel of land in Port
Orford, Oregon, and began operating a tree farm. Over the next
several years, petitioners purchased various equipment for the
tree farm, including a tractor, two trailers, and a sprayer.
Petitioners paid more than $50,000 for the equipment, which they
1 Petitioners concede $22,815 of expense deductions claimed
on Schedule E, Supplemental Income and Loss. The remaining
adjustments in respondent’s notice of deficiency are
computational; therefore, we do not address them.
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Last modified: May 25, 2011