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determined tax deficiencies and penalties with respect to
the adjustment of petitioners' deductions for advertising,
bad debts, and rent expense. The following explanation of
respondent's adjustment to petitioners' advertising expense
is provided in the notice:
The deductions of $6,448.00, $16,535.00 and
$18,141.00 shown on your 1990, 1991 and 1992
returns, respectively, as Schedule C advertising
expense are reduced by $3,329.00, $15,600.00 and
$17,169.00, respectively, because it has not been
established that any amounts more than $3,119.00,
$935.00 and $972.00, respectively, were for
ordinary and necessary business expenses, or were
expended for the purpose designated. Therefore,
your taxable income is increased $3,328.00,
$15,600.00 and $17,169.00, respectively.
Prior to issuance of the notice of deficiency, petitioners
conceded liability for the portion of the proposed
deficiencies attributable to the bad debts and rent expense
adjustments. Petitioners did not concede liability for the
accuracy-related penalty under section 6662 with respect to
any of the adjustments.
Although he is highly educated, petitioner has had
no formal training in tax law. Since at least 1990,
petitioner has researched income tax issues by reading the
Internal Revenue Code, accompanying regulations, case law,
and other tax materials such as tax guides. Although
petitioner has never sought formal advice from lawyers,
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