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(4) whether petitioners are entitled to certain Schedule C
deductions for tax year 1994; and
(5) whether petitioners are liable for accuracy-related
penalties for negligence pursuant to section 6662(a), for all
years at issue.
Some of the facts have been stipulated and are herein
incorporated by this reference. When they filed their petition,
petitioners were married and resided in Milpitas, California.
For purposes of order and clarity, each of the issues
submitted for our consideration is set forth below with separate
background and discussion.
The Danville Property
Background
On September 29, 1989, petitioners purchased their primary
residence on Creekpoint Court in Danville, California. On April
30, 1992, petitioners executed a grant deed dated April 29, 1992,
conveying the property to Mamoona P. Haq (Haq) for a purchase
price of $400,000. On June 17, 1992, the grant deed was recorded
in Contra Costa County, California.
By a document captioned “Deed of Trust with Assignments of
Rents”, dated May 15, 1992, and signed by Haq on May 18, 1992,
Haq assigned to petitioners, for consideration of $24,359.30, all
rents, issues and profits with respect to the Danville property.
A document captioned “Assignment of Deed of Trust and Request for
Special Notice”, also dated May 15, 1992, and bearing
petitioners’ signatures, represents that petitioners were thereby
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