Sherman J. Miller and Alice K. Miller - Page 4

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            Hayward consisted primarily of "prospecting" in the years here in                         
            issue.  Petitioner considers that when an insurance agent meets                           
            potential clients who are willing to speak about insurance, the                           
            agent is "prospecting".  Petitioner's "prospecting" activities in                         
            the Hayward area consisted of going to dinner, playing golf at                            
            the Tagalong Country Club, and having drinks with persons he                              
            considered potential clients.                                                             
                  For the taxable year 1987, petitioner reported gross                                
            receipts in the amount of $6,795 from his insurance business, of                          
            which $2,249 was identified as related to business in Hayward,                            
            Wisconsin.  For the taxable year 1988, petitioner reported gross                          
            receipts in the amount of $5,803, none of which was identified on                         
            the return as relating to business in Hayward.                                            
                  Petitioner deducted expenses that he claimed as related to                          
            his insurance business in Hayward on both Schedule C, Profit (and                         
            Loss) from Business or Profession, and Form 2106, Employee                                
            Business Expenses, of his Federal income tax return for each of                           
            the taxable years 1987 and 1988.                                                          
                  On August 7, 1984, petitioners purchased a condominium that                         
            was located approximately 14 miles southwest of Hayward (the                              
            condominium) for $39,417.  The condominium was a three-bedroom                            
            unit.  For the taxable years 1984 through 1986, petitioners, on                           
            Schedule E of their Federal income tax returns, deducted expenses                         
            connected with the condominium, listing it as rental property.                            






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