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received before September 25, 1991, and adding the number
of entries in his journal for the period after
September 24, 1991. He then multiplied that sum by $15,
a minimum charge for his medical services. Petitioner
computed the value of the telephone services deducted in
1992 by multiplying the number of entries in his log by
$20, a minimum charge for his medical services. Petitioner
did not include in gross income the value of the uncompen-
sated medical services deducted on his returns for 1990,
1991, or 1992.
Following his audit of petitioners' income tax returns
for 1990, 1991, and 1992, respondent's revenue agent
proposed adjustments to the deductions claimed by
petitioners for advertising expenses, bad debts, and rent
expense. The agent mailed a copy of his preliminary report
to petitioners. In a section of the revenue agent's report
dealing with the adjustments to petitioners' advertising
deductions, the report states as follows:
FACTS:The [sic] taxpayer is a medical doctor that
runs an ambulatory (Walk-in) medical clinic. The
taxpayer is the only doctor in the clinic. The
taxpayer reports his income on Schedule C of his
Form 1040. The taxpayer uses the cash method of
accounting. Under the cash method of accounting,
the income is reported when received and the
expenses deducted when paid. It was discovered
that most of the deduction that the taxpayer had
for advertising was what the taxpayer called
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