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The issues for decision are: (1) Whether petitioners are
entitled to a section 162 deduction for accrued expenses of
$15,000; and (2) whether petitioners are liable for the section
6662(a) accuracy-related penalty.
Background
Some of the facts have been stipulated, and they are so
found. The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time they filed
their petition, petitioners resided in Thousand Oaks, California.
References to petitioner are to Mack L. McCoy.
Petitioner is an architect by trade. In 1991, petitioner
managed an interior design firm that built model homes for
homebuilders. He worked 30 hours per week as a W-2 wage earner.
Petitioner also acted as a consultant to various individuals
under his proprietorship named Mack McCoy. As Mack McCoy’s
proprietor, petitioner provided his clients with management
services, such as marketing and overall management advice and
internal work scheduling. Petitioner indicated that his
consulting business had been on-going for about 20 years. In
1991, petitioner had one main client, a structural engineer, who
paid petitioner $2,000 per month for about five months of
services. The 1991 Schedule C for Mack McCoy reflects gross
income of $10,913.64. Petitioner used the cash method of
accounting to report Mack McCoy’s income and expenses.
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