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Petitioner testified that he paid $6,000 in interest per year in
1994 and 1995, in monthly payments of $500 each. However, he
only established that he made the monthly payments in February,
March, May, and July through December 1994, and January through
October 1995. Petitioner repaid the principal in two payments of
$30,000 each, one in December 1996 and the other in October
1997.3 Petitioners filed Schedules C, Profit or Loss From
Business, for an unnamed business in 1994 and 1995. In the
notice of deficiency, respondent determined that petitioners
improperly reported income and claimed expenses on these
Schedules C, and instead should have used Schedules E,
Supplemental Income and Loss, because the income and expenses
were related to rental activities.4 Although significant
deductions were allowed by respondent in connection with this
2(...continued)
when the parties “introduced the issue at trial and acquiesced in
the introduction of evidence on that issue without objection.”).
3Nearly all the payments were in the form of checks drawn on
accounts in the name of Will or Janie Barck. However, the
payment made in May 1994 was drawn on an account in the name of
Barck, Inc. Whether such a corporation actually existed is
unclear from the record. If it did not, this account was most
likely used by petitioner informally for individual business
purposes. In any event, we accept petitioner’s testimony that he
intermingled funds between his accounts and that he used
individual funds deposited into the Barck, Inc. account to make
the interest payment.
4Petitioners also filed a Schedule C in 1993 for a business
involved in “mobile home rent.” It is unclear if this is the
same rental activity as that in which petitioners were engaged in
1994 and 1995.
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