Jeffrey C. and Kelly O. Stone - Page 2

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                         OPINION OF THE SPECIAL TRIAL JUDGE                           
               POWELL, Special Trial Judge:  Respondent determined a                  
          deficiency and an accuracy-related penalty for negligence under             
          section 6662(a) in petitioners' 1994 Federal income tax in the              
          respective amounts of $10,959 and $2,192.                                   
               The issues focus on whether certain expenses paid by                   
          petitioners during 1994 are deductible under section 162.  At the           
          time the petition was filed, petitioners resided in Belgrade,               
          Montana.                                                                    
               Before trial, petitioners filed a motion for summary                   
          judgment raising various procedural issues concerning the                   
          involvement of the Montana Department of Revenue and the Internal           
          Revenue Service examination of petitioners' returns for 1994                
          filed with the State of Montana and the Federal Government.                 
          Petitioners' motion for summary judgment was denied in the                  
          Court's opinion at Stone v. Commissioner, T.C. Memo. 1998-314.              
          We turn now to the underlying substantive dispute.                          
                                     Background                                       
               The facts may be summarized as follows.  Petitioner Jeffrey            
          C. Stone (Mr. Stone) operates an appliance repair business.2  Mr.           
          Stone has a shop in Belgrade that is approximately 8 miles from             

               2  Petitioners also testified that in addition to the                  
          appliance repair business they conduct business activities                  
          involving the sale of water and air filters and "Melaleuca"                 
          sales.  It does not appear, however, that either of these                   
          activities generated any income.                                            





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