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After concessions,1 the issues for our consideration are:
(1) Whether petitioners are entitled to offset gross proceeds
reported on their 1991 and 1992 Schedules C, Profit or Loss From
Business, by the amounts of $250,000 and $140,000, respectively,
that they claimed as cost of goods sold; and (2) whether
petitioners are liable for the accuracy-related penalty under
section 6662(a) for the 1991 and 1992 tax years.2
FINDINGS OF FACT
The parties’ stipulation of facts and the exhibits are
incorporated herein by this reference.
Petitioners resided at 455 Irwin Street, #201, San
Francisco, California, at the time their petition was filed.
David E. Newman (petitioner) is an entrepreneur who has been
involved in a wide range of business opportunities for the
1 The parties filed a stipulation of settled issues, whereby
petitioners conceded: (1) They are not entitled to Schedule C
secretarial expenses in the amount of $5,439 for the 1991 tax
year; (2) they are not entitled to Schedule C meals and
entertainment expenses in the amounts of $73,554 and $12,122 for
the 1991 and 1992 tax years, respectively; (3) they are not
entitled to Schedule C charity expenses in the amount of $8,489
for the 1991 tax year; and (4) $46,255 of their net operating
loss carryback from the 1993 tax year to the 1991 tax year is not
allowable. The parties also agree that the adjustments in the
notice of deficiency to petitioners’ 1992 self-employment tax
deduction, 1992 itemized deductions, and 1991 and 1992 deductions
for exemptions are computational adjustments and will be
determined after the remaining issues have been resolved.
2 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable periods under
consideration, and all Rule references are to the Tax Court Rules
of Practice and Procedure.
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