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Consistent with her examinations of FOTA, respondent reduced the
losses claimed by petitioner from FOTA by $17,101 and $21,891 for
the years 1987 and 1989, respectively, and increased the losses
claimed by $24,070 for the year 1988.
OPINION
Section 162(a) generally allows a deduction for all ordinary
and necessary expenses paid or incurred during the taxable yearin
carrying on a trade or business. Section 280A(a) provides that
in the case of a taxpayer who is an individual or an S
corporation, no deduction otherwise allowable under chapter 1
(Normal Taxes and Surtaxes) shall be allowed with respect to the
use of a dwelling unit which is used by the taxpayer during the
taxable year as a residence. The term "dwelling unit" includes a
house, apartment, condominium, or similar property, and all
structures or other property appurtenant to such dwelling unit.
Sec. 280A(f)(1).
Section 280A(c)(1) provides an exception to section 280A(a)
stating that subsection (a) shall not apply to any item to the
extent such item is allocable to a portion of the dwelling unit
which is exclusively used on a regular basis as the principal
place of business for any trade or business of the taxpayer.
Sec. 280A(c)(1)(A).4 Section 280A(c)(5) provides a limitation on
4In her brief, respondent raised an argument that petitioner
failed to satisfy the "exclusive use" test with respect to the
basement level of the building. The argument is inconsistent
with allocations expressly and implicitly made in respondent's
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