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clients, and any further revenue would be divided equally. The
business had no office, but petitioner rented a mailbox in
Modesto, California, for its use. Clients would pay between $50
and $100 for the housekeeping services with the exception of one
client who was a cosmetic surgeon and who rendered payment in the
form of breast implant surgery. The cost of goods sold claimed
on petitioner’s return in the amount of $750 was the cost of Ms.
Castillo’s housecleaning services rendered to clean petitioner’s
personal residence “to foster motivation and enthusiasm in Ms.
Castillo.” This same expenditure was also claimed as a deduction
for wage expense. The advertising expense of $6,000 consists
partly of advertising at a bar/restaurant during “Friday night
get-togethers with the local crowd” in which petitioner would
find out who needed housekeepers. The remainder is non-
advertising expense which was categorized improperly. Petitioner
also purchased insurance and cleaning supplies for the business,
as well as a computer that was used over half the time for
business purposes. Finally, petitioner purchased meals while
traveling to look for clients. The business was terminated when
Ms. Castillo’s boyfriend asked her to terminate her business
relationship with petitioner in order to foster their own
personal relationship.
We find that, at most, petitioner was in the process of
starting a business which never materialized. However, assuming
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Last modified: May 25, 2011