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officers. The after-tax amounts of petitioner's bonus payments
were credited against the debit balance in the personal expense
account. In other words, the bonus payments were used to repay
the amount owed by petitioner to Tracstar for personal expenses
charged to the Corporate card and the Gold card. The total
amount credited to the personal expense account in this manner
during 1994 was $21,798.66. Tracstar's balance sheet dated
December 31, 1994, shows a debit balance in the personal expense
account in the amount of $20,289.68.
Petitioner ceased working for Tracstar in January 1995. He
disputes his liability for some of the charges which Ms. Parsons
characterized as personal expenses and debited to the personal
expense account. Litigation over the amounts payable by
petitioner and Tracstar was ongoing at the time of the trial in
this case.
Petitioners filed a joint Federal income tax return for
1994. Their return was prepared by Tracstar's accountant,
Michael Klecka. Petitioners reported the total of petitioner's
regular ($65,000 = 26 payments times $2,500) and bonus
compensation ($31,680 = 11 payments times $2,880) from Tracstar
as wages and other compensation on petitioners' 1994 return.
Petitioners claimed a Schedule C business loss deduction in
the amount of $19,553. In the statutory notice of deficiency,
respondent disallowed the claimed deduction. The Schedule C and
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