Derk O. and Julia K. Pehrson - Page 3

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          through Memphis, Tennessee, and visited Graceland, the former               
          home of Elvis Presley, the deceased entertainer.  While in                  
          Orlando, petitioner wife attended a seminar in connection with              
          her job at Hercules, and petitioner husband and the children                
          visited Walt Disney World and Universal Studios.  The family also           
          visited the Kennedy Space Center at Cape Canaveral, Florida, and            
          several other tourist attractions during their trip.  Upon                  
          departing Orlando, the family drove north to Harrisburg,                    
          Pennsylvania, where petitioner husband conducted business with              
          regard to his real estate sales activity.  Once petitioner                  
          husband completed his business, the family drove back to Salt               
          Lake City.  The entire trip encompassed approximately 2-1/2                 
          weeks, and the cost for the automobile rental was $904.59.                  
               On their 1993 Federal income tax return, which they filed on           
          June 12, 1995, petitioners deducted on Schedule C, Profit or Loss           
          From Business, among other expenses, $905 for the cost of renting           
          the automobile used to make the aforementioned Orlando trip.  In            
          the notice of deficiency, respondent made several adjustments,              
          including the disallowance of the $905 automobile rental expense            
          deduction.  Respondent further determined that petitioners were             
          liable for the addition to tax, under section 6651(a)(1), for               
          failure to timely file a Federal income tax return.  Prior to               
          trial, the parties settled all adjustments in the notice of                 







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