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any amount out of these proceeds to be applied to his claims
against the estate.
During 1990, petitioner was employed on a full-time basis
with United Energy Services Corp. doing work in the field of
information systems. He reported salary and wage income of
$74,154.61 from his employer for 1990.
On their 1990 Federal income tax return, petitioners
reported on Schedule C, Profit or Loss from Business, income of
zero, expenses of $37,726, and a net loss of $37,726 from CIS.
Included in the amount of expenses claimed was a business bad
debt deduction of $12,500 representing a portion of the
$52,962.95 loans and advances by petitioner to Ms. Marshall.
Petitioner included the bad debt deduction on Schedule C for CIS
because he contends that CIS is a business that includes both his
non-rental-related activities, with respect to the Bridgewater
and Clinton properties, and his rental-related activities, with
respect to the property he and Ms. Marshall owned in Knoxville.
However, petitioners reported the rental income and other
expenses from the properties in Knoxville on Schedules E,
Supplemental Income and Loss, of their 1990 Federal income tax
return.
In the notice of deficiency, respondent disallowed all of
the expenses claimed by petitioners on Schedule C of their 1990
return. Respondent determined that petitioners were not entitled
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