Linda Klyce - Page 7




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          deposits method to make the relevant income adjustments.                    
          Proportionate shares of these adjustments with respect to                   
          petitioner's interests in these entities were reflected in the              
          notice of deficiency issued to petitioner.                                  
               In the notice of deficiency for 1991, 1992, and 1993,                  
          respondent made the following adjustments to petitioner's income:           

               Adjustment to Income                                                   
               (Increase/(Decrease))           1991      1992      1993               
               Special Occasions             $ 1,967   $ 5,888   $ 6,285              
               Klyce Day Care                4,989     1,989     3,200                
               Special O income              10,237    10,374    14,866               
               Sec. 179 depreciation1   --             --        (211)                
               Sweets 'N' Things             (1,833)  (1,586)    (998)                
               Self-employment tax ded.2     --      (105)    (184)                   
               Net increase in income        $15,360   $16,560   $22,958              
               1 Allowed in connection with Special O.                                
               2 Respondent determined that petitioner was liable for                 
               self-employment taxes of $210 for 1992 and $367 for 1993.              

               Prior to trial, the parties stipulated to each item of                 
          income and expense in connection with Sweets 'N' Things for 1991,           
          1992, and 1993, with the exception of a supply and equipment                
          expense deduction for 1991 and a food expense deduction for 1992.           
          With respect to Special Occasions, the parties stipulated that              
          Special Occasions did not sustain a loss for 1991.  The parties             
          further stipulated each item of income and expense in connection            
          with Special Occasions for 1992 and 1993, with the exception of             






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