JRJ Express Incorporated, A California Corporation, d.b.a. King Express International - Page 2

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               Following a concession by respondent, we must decide: (1)              
          Whether petitioner is entitled to deduct all of its claimed                 
          expenses; and if not, (2) whether petitioner is liable for the              
          section 6662(a) accuracy-related penalty.                                   
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.  The          
          stipulation of facts and the attached exhibits are incorporated             
          herein by this reference.                                                   
               The record before us is incomplete; nonetheless, we have               
          attempted, as best we can, to ascertain the facts necessary to              
          resolve the issues before us.                                               
          Background                                                                  
               Petitioner (or JRJ), a California corporation, was formed in           
          1988 by Jose F. Leon (J.F. Leon), its sole shareholder.  J.F. Leon          
          was born in Guatemala in 1948, the third oldest brother in a family         
          of 12. He came to the United States in 1968 after family                    
          infighting, and subsequently became a U.S. citizen.  One of J.F.            
          Leon's brothers, Jose E. Leon, is an officer of JRJ.                        
               At all relevant times petitioner maintained its principal              
          place of business in Los Angeles, California.  JRJ timely filed its         
          Federal income tax return for tax year ended April 30, 1993 (the            
          year in issue).                                                             
          Petitioner's Business--"Outbound Deliveries"                                
               Petitioner is in the courier business, delivering letters and          
          small packages from the United States to Guatemala.  During the             



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