Patrick E. Catalano - Page 2

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          Accuracy-Related Penalty                                                    
               Year           Deficiency             Sec. 6662(a)1                    
               1990           $9,743                   $1,949                         
               1991           7,289                   808                            
               1992           26,951                   5,390                          
               The issues for decision are: (1) Whether petitioner's                  
          S corporation is entitled to deduct lease payments for the use of           
          petitioner's boats; (2) if the answer to the foregoing is in the            
          negative, whether the petitioner may exclude a portion of those             
          lease payments from income; and (3) whether petitioner is subject           
          to the accuracy-related penalties for negligence.                           
                                  FINDINGS OF FACT2                                   
               Petitioner resided in San Francisco, California, at the time           
          the petition herein was filed.  For the years in issue,                     
          petitioner was the sole shareholder of an S corporation named               
          Patrick E. Catalano, a Professional Law Corporation.                        
               Petitioner's corporation maintained law offices both in San            
          Francisco and in San Diego, California.  Petitioner’s clients               
          were primarily from San Francisco, the adjacent Marin County                
          area, or the San Diego area.                                                

               1 Unless otherwise indicated, all section references are to            
          the Internal Revenue Code in effect for the years in issue, and             
          all Rule references are to the Tax Court Rules of Practice and              
               2 Some of the facts have been stipulated and are so found.             
          The stipulation of facts and attached exhibits are incorporated             
          herein by this reference.                                                   

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