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to run his steam cleaner, welder, and air compressor and to
charge his trucks in the winter. Petitioner used their phone for
long-distance business calls. Petitioner documented that he paid
$846 of his parents’ phone bills and $591 of his parents’ utility
bills.
In the notice of deficiency, respondent allowed petitioner
some deductions for utilities. Respondent calculated the
allowance for telephone costs by subtracting from the phone
expenses paid the estimated annual cost of basic residential
coverage ($110) and then allowing petitioner a deduction equal to
75 percent of the balance expended by petitioner. Respondent
calculated the allowance for electricity and water by allowing
petitioner a deduction equal to 75 percent of the balance
expended by petitioner.5
Under the circumstances, the amount allowed by respondent
for utilities is reasonable. Petitioner did not keep precise
records of the utilities used by his business. In fact, because
of the loose reimbursement arrangement petitioner had with his
5On brief, respondent states that he determined the amount
to be disallowed as follows: Of the $2,755 of documentation
submitted, $1,318 reflected expenses paid by petitioner’s
parents, $110 was the cost of basic phone coverage, and $332 was
treated as allocable to personal use. The adjustment was
determined by subtracting from the amount claimed on petitioner’s
1994 return, $1,429, the amount respondent calculated was
allowed, $995, resulting in an adjustment of $434, rounded.
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