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On August 17, 1994, the Appeals Office referred the case
back to the examination division. The case was assigned to
Revenue Agent Kurt Bensworth (Mr. Bensworth). Sometime after
September 28, 1994, Mr. Bensworth issued a report recommending
full disallowance of the refund claim. On April 24, 1995, the
IRS mailed a notice of deficiency to petitioners asserting a
deficiency of $10,801--the amount of the refund claim which was
previously allowed and abated.
OPINION
Petitioners contend that the real estate activity was part
of the construction consulting business or, alternatively, that
it was a separate trade or business. Respondent argues that the
real estate activity was not part of petitioners' construction
consulting business;5 furthermore, respondent contends that the
real estate activity was not itself a trade or business.
Therefore, according to respondent, section 162 does not support
the deductibility of the additional expenses. Respondent
alternatively argues that if the real estate activity was part of
petitioners' construction consulting business, or was itself a
trade or business, then the additional expenses must be
capitalized.
5 Respondent concedes that Mr. Finnegan was in the trade or
business of being a construction consultant.
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