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was used in connection with their trade or business and in
connection with their investment property. In the notices of
deficiency, respondent disallowed the home office deductions for
1990 and 1991 on the ground that the office was not used
exclusively for business under section 280A. At trial, however,
respondent conceded the adjustments relating to petitioners' home
office expenses, and further conceded petitioners were entitled
to home office deductions based on 120 square feet of space
rather than 110 square feet claimed by petitioners on their
returns.
Section 274(d) provides that no deduction shall be allowed
with respect to "listed property" as defined in section
280F(d)(4), unless the taxpayer substantiates by adequate records
or corroborative evidence (A) the amount of the expense, (B) the
time and place of use, (C) the business purpose, and (D) the
business relationship of the taxpayer to the persons using listed
property. Sec. 274(d)(4). Petitioners did not maintain such
records with respect to their computer.
The term "listed property" under section 280F(d)(4) includes
any computer or peripheral equipment. Sec. 280F(d)(4)(A)(iii).
However, section 280F(d)(4)(B) provides generally that the term
"listed property" shall not include any computer or peripheral
equipment used exclusively at a regular business establishment,
and any portion of a dwelling unit shall be treated as a regular
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