Howard G. and Anna C. Grider - Page 4




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          1994,2 by $25,000.  He did so to increase petitioners’ income for            
          Social Security purposes.                                                    
               Petitioners understated gross receipts on their Schedule C              
          by $139,993, and purchases by $101,763.  Petitioners overstated              
          their fuel tax credit by $8,884 for 1994.                                    
                                       OPINION                                         
          A.   Whether Respondent Properly Disallowed Petitioners’                     
               Deduction of $63,630 of Repairs Expenses for 1994                       
               The first issue for decision is whether petitioners may                 
          deduct more than $51,203 for repairs expenses for 1994.                      
          Petitioners contend that they may deduct $114,823 for repairs                
          expenses for 1994.  Petitioners did not report income until they             
          received it, but they deducted some expenses before they paid                
          them.  Petitioners contend that this is a proper hybrid method of            
          accounting which they have consistently and properly used to                 
          compute and report petitioner’s income and expenses from his                 
          logging business.  Petitioners also contend that respondent’s                
          determination was an abuse of discretion because the cash method             
          of accounting does not clearly reflect petitioner’s income from              
          the logging business.                                                        
               We disagree.  First, petitioners did not explain why the                
          cash method would not clearly reflect their income.  Second,                 
          petitioners did not use a valid hybrid method of accounting.                 

               2 Petitioner incurred only $114,823 of repair expenses in               
          1994.                                                                        





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