Les B. Martin and Millie A. Martin - Page 18

          business activities, or (b) as a place of business to meet or deal          
          with clients.  Moreover, petitioners have not satisfied the                 
          limitation of section 280A(c)(5), which provides that the amount of         
          the home office deduction is limited to the excess of the gross             
          income generated from the business activity conducted in the home           
          office, less all other deductible expenses attributable to such             
          activity which are not allocable to the use of the home office              
          itself.  In other words, the deduction may not create or increase           
          a net loss from the business activity to which it relates.                  
          Grinalds v. Commissioner, T.C. Memo. 1993-66 (citing H. Rept. 99-           
          426, at 134-135 (1985), 1986-3 C.B. (Vol. 2) 135).  In the instant          
          case, Mr. Martin derived no income from his consulting business in          
          1989 or 19905 and Mrs. Martin only derived $1,778 in 1989 from her          
          Schedule C activity and no income for 1990.                                 
               Petitioners also claim entitlement to a business deduction for         
          the use of their 1988 Honda Accord for business activities.                 
          Petitioners both testified that their 1988 Honda was used almost            
          exclusively for business.  However, on the application for the              
          insurance policy on the automobile, petitioners stated the car was          
          used for pleasure and not for business.  In this regard, we do not          
          find petitioners' testimony credible.  In sum, petitioners are not          

               5    Mr. Martin contends his income from Woodhead from the             
          time he was relieved as president of Aero-Motive in September               
          1989 until September 1990, should be characterized as Schedule C            
          income.  We disagree.  Mr. Martin received a W-2 with respect to            
          his income, which petitioners reported as wages on their original           
          1989 and 1990 tax returns.                                                  

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