Preston L. and Ruby M. Payton - Page 3

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          and personal care products, principally aloe vera products from             
          the Living Products company.  Petitioners reported the hauling              
          activity and the retail sales activity on a single Schedule C for           
          each of the taxable years 1993 and 1994.  Ruby also operated a              
          rooming house during the taxable years at issue.  Petitioners               
          purchased the rooming house on January 29, 1993.                            
               The signature date of each petitioner on their 1993 return             
          is June 4, 1994.  Petitioners' 1993 return was mailed to the                
          Internal Revenue Service (Service) in an envelope bearing the               
          date June 7, 1994.  The Service received petitioners' 1993 return           
          on June 13, 1994.  Petitioners did not request an extension of              
          the date to file their 1993 return.                                         
               Respondent, inter alia, adjusted petitioners' gross                    
          receipts, adjusted the costs of goods sold attributable to Ruby's           
          business, and disallowed in whole or in part many Schedules A and           
          C deductions.  Respondent disallowed some claimed expenses                  
          because it was not established that the expenses were paid or               
          incurred during the taxable year, and that they were ordinary and           
          necessary, or because it was not established that a business                
          benefit could reasonably be expected as the result of incurring             
          entertainment expenses.  Respondent also determined that                    
          petitioners were subject to self-employment tax.                            
               Deductions are strictly a matter of legislative grace.                 
          INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New                  





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