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In the early 1980s, Great's business area covered the States of
Florida, Georgia, and Alabama. By 1982, Great was operating
(i.e., holding seminars) in about 26 States. Throughout the
years in controversy, Service's principal place of business was
in the Johnsons' residence. The Johnsons' residence, a three-
bedroom condominium, contained 1,600 square feet of usable space,
of which 320 square feet was used exclusively for Service's
business purposes. In addition, the Johnsons' two-car garage
contained 300 square feet, with an equal amount of attic storage
area above the garage. Of the 600 total square feet of combined
garage area, 400 square feet was used exclusively for business
purposes. The Johnsons' residential telephone was listed in
Service's name. Service's checks contained the Johnsons'
residence address. During this period, Great had a separate
principal place of business and office in a commercial location
outside of the Johnsons' residence.
Service paid the Johnsons' residential mortgage payments of
$5,043 and $5,400 during 1982 and 1983, respectively. Service
deducted $1,443 and $1,800 on its 1982 and 1983 income tax
returns for use of the Johnsons' residence. For those same
years, the Johnsons reported $3,600 in income for Service's use
of the residence, because the mortgage was paid by Service.
Respondent determined that only 10 percent of the residence was
used for business purposes and disallowed the mortgage and other
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