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correct the overstatement of expenses of the rental portion, she
divided the loss by one-half and reported a loss of $8,400
instead of $16,800. Petitioner has acknowledged in the
stipulation of facts that her procedure of dividing the loss in
half results in a computational error that overstates her loss by
$2,800, because it also has the effect of improperly reducing her
gross rental income by one-half.
In adjusting petitioner's Schedule E rent income, respondent
disallowed some expenses while allowing others in excess of the
amounts stated on the return. Respondent adjusted petitioner's
rent income as follows:
Expense Item Expense Per Return Allowed
Insurance $996 $499
Repairs 4,000 0
Supplies 3,407 0
Taxes 2,128 3,795
Gas 1,113 0
Depreciation 3,588 4,206
15,232 8,500
Total disallowed expenses 6,732
50 percent business allocation x .50
Schedule E expense disallowance 3,366
Schedule E computational error 2,800
Schedule E adjustment in the 6,166
notice of deficiency
C. Petitioner's Daughters
Petitioner has two daughters, Emelina and Jennifer, who in
1993 were 25 and 18 years old, respectively. Emelina and
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Last modified: May 25, 2011