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determination that petitioners underreported their income and
overstated Schedule C deductions for 1992. The specific issues we
must resolve are:
(1) Did petitioners underreport their income in 1992 by
$25,112? Respondent determined this amount through the bank
deposits method, showing total deposits of $82,072,1 of which
$45,332 was reported by petitioners on their tax return and $11,628
was conceded by respondent at trial as nontaxable. We find that
the $25,112 difference came from nontaxable sources; thus, we hold
that petitioners did not underreport their 1992 income by $25,112.
(2) Must petitioners include $7,220 in income, representing
the market value of a trip to Scotland and England petitioner
Gregory A. Maslow earned in 1992 as a sales award from Kentucky
Central Life Insurance Co.? We hold they must.
(3) Are petitioners entitled to deduct various claimed
Schedule C business expenses that respondent disallowed? We hold
that petitioners are entitled to a portion, but not all, of the
claimed Schedule C business expenses, as explained in greater
detail infra.
(4) Are petitioners liable for the accuracy-related penalty
under section 6662 for 1992 and for an addition to tax for failure
1 The notice of deficiency states in one instance that
the deposits for 1992 total $80,096 and in another instance
$81,029. On brief, respondent states the total deposits as
$82,072. On the basis of our holding that the unidentified
deposits are not taxable, the differing deposit amounts are of no
importance.
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