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1 50 percent of the interest due on the portion of the
underpayment attributable to negligence.
After concessions,1 the issues for decision are: (1)
Whether petitioner had unreported Schedule C income. We hold
that she did to the extent set out below. (2) Whether petitioner
may deduct claimed Schedule C expenses in excess of the amounts
allowed by respondent. We hold that she may not except as set
out below. (3) Whether petitioner may deduct claimed employee
business expenses. We hold that she may not. (4) Whether
petitioner may deduct a claimed capital loss. We hold that she
may not. (5) Whether petitioner had additional self employment
income. We hold that she did. (6) Whether petitioner is liable
for the additions to tax for negligence under section 6653(a)(1)
(2).2 We hold that she is liable. (7) Whether petitioner is
liable for an addition to tax for substantial understatement of
tax under section 6661(a). We hold that she is liable.
1 Respondent conceded that petitioner is allowed Schedule C
deductions of $2,485 and $986 for legal expenses and office
expenses, respectively. Petitioner conceded that she had
unreported Schedule C income of $433, and that she is not
entitled to a $20 Schedule C deduction for dues and publications,
or a $403 Schedule C deduction for insurance.
The parties agree that, due to the increase in petitioner's
adjusted gross income, petitioner's claimed general sales tax
deduction and child and dependent care credit must be
mathematically adjusted. The parties can make these adjustments
in their Rule 155 computations.
2 All section references are to the Internal Revenue Code in
effect for the taxable year in issue, and all Rule references are
to the Tax Court Rules of Practice and Procedure, unless
otherwise indicated.
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