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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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