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During the mid-1980's, Barry Knelman began operating a
landscaping business in southern California named “Barry Knelman
Plant Company”. Mr. Knelman operated the landscaping business as
a sole proprietorship, selling and maintaining indoor plants for
business offices in the Los Angeles County area. In 1991,
petitioners decided to move to Ohio so that their children could
be closer to the rest of their family. Instead of selling,
relocating, or closing the landscaping business, Mr. Knelman
decided to continue operating the business in California.
Throughout 1994, petitioners maintained their residence in
Ohio. During this period, the only business petitioners owned or
operated was the landscaping business in southern California.
Because Mr. Knelman could not afford to hire a full-time employee
to manage the landscaping business, he traveled to California
every month. During 1994, Mr. Knelman spent more than 6 months
in California, with each stay lasting approximately 14 days.
Petitioners filed a joint Federal income tax return for the
taxable year ending December 31, 1994. On their return,
petitioners failed to report $14,555 from the landscaping
business. Petitioners also claimed $3,365 in Schedule C
deductions for the costs Mr. Knelman incurred traveling between
his residence in Ohio and his landscaping business in southern
California. The disputed deductions involve $2,035 for travel
expenses and $1,330 for meals and entertainment expenses.
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Last modified: May 25, 2011