Gerald L. and Joy M. Zeidler - Page 20

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               On their Federal income tax returns for 1990 and 1991,                 
          petitioners claimed, on Schedule C of their returns, Profit or              
          Loss From Business, depreciation deductions of $2,751 and $1,800,           
          respectively, on a computer that was located in petitioners'                
          home.  Petitioners contend the computer was used 80 percent in              
          connection with a financial services activity that Mr. Zeidler              
          conducted out of their home, and for which petitioners reported             
          their income and expenses on Schedule C of their returns.                   
          Petitioners contend that the computer was used 20 percent in                
          connection with two residential rental properties petitioners               
          owned, and as to which petitioners reported their income and                
          expenses on Schedule E of their returns, Supplemental Income and            
          Loss (From rents, royalties, partnerships, estates, trusts,                 
          REMICs, etc.).  In the notices of deficiency, respondent                    
          disallowed the depreciation deductions claimed with respect to              
          the computer for both years.  Respondent contends that the                  
          claimed deductions were not substantiated pursuant to section               
          274(d)(4).  On their income tax returns for 1990 and 1991,                  
          petitioners also claimed deductions on Schedule C of their                  
          returns for expenses relating to the office in their home that              


          8(...continued)                                                             
          1120S, U.S. Income Tax Return For An S Corporation, filed by JMZ            
          Management, Inc., for 1992.  Respondent disallowed the loss of              
          $3,567 reported by petitioners.  Petitioners are entitled to a              
          $300 depreciation deduction for 1992 for the Sister Bay property            
          for the reasons discussed above.                                            




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