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section 280A(c). The substantiation of the amounts claimed is
also not at issue.
As previously stated, section 162(a) allows a taxpayer to
deduct all the ordinary and necessary expenses paid or incurred
in carrying on any trade or business. Section 280A, in general,
denies deductions with respect to the use of a dwelling unit that
is used by the taxpayer during the taxable year as a residence.
Section 280A(c)(1), however, allows the deduction of expenses
allocable to that portion of a dwelling unit that 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).
Furthermore, section 280A(c)(2) allows the deduction of expenses
allocable to the portion of the dwelling unit used on a regular
basis as a storage unit for the inventory of the taxpayer held
for use in the taxpayer's trade or business of selling products
at rental or wholesale, but only if the selling unit is the sole
fixed location of such trade or business.
Respondent determined, in the notice of deficiency, that
section 280A(c)(5) limits the deductibility of the amount claimed
for both the home office and inventory storage to the amount of
income earned by the activity. Accordingly, respondent
determined that, of the total of $1,602.86 claimed by petitioners
on their 1992 return for the home office and inventory storage
($801.43 + $801.43), the deduction is limited to the $435.53
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