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During 1985, petitioner was employed by Eduardo, Inc. and
received $23,121.56 from that employment. During that year, he
also received $7,102 of income from other sources.
At the end of 1985, petitioner purchased a 1986 Jeep for
$9,500 by paying $1,500 as a down payment and borrowing $8,000
that he was to repay in monthly installments of $198.81.
Petitioner reported the wages and the additional income that
he received during 1985 in his return for that year. He reported
no other income in his 1985 return. In that return, petitioner
claimed the following deductions: $19,576 in home mortgage
interest, $550 in credit card interest, $139 in interest paid to
Ford Motor Credit Company, $4,099 in State and local income,3
real property, and sales taxes, and $156 in charitable contribu-
tions.
On November 24, 1986, petitioner, Ihsan Dura, and Lee Thack
incorporated C & I, Inc. (C & I) for the principal purpose of
operating a retail clothing business. Petitioner and Ihsan Dura
each subscribed for 50 percent of the common stock of C & I for
$100,000, or a total subscription of $200,000 ($200,000 stock
subscription). During all relevant periods, including 1986,
petitioner was president, and Ihsan Dura was vice president, of C
& I.
3 Petitioner deducted $1,445 of State and local income taxes in
his 1985 return.
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