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Gross Total Net profit
Year Receipts Expenses or (loss)
1989 $153 $19,695 ($19,542)
1990 –- 23,462 (23,462)
1991 209 24,144 (23,935)
1992 –- 13,991 (13,991)
1993 –- 23,769 (23,769)
Most of the income reported on petitioners’ returns for 1989
through 1993 was investment income.
Respondent audited petitioners’ returns for the years in
issue and made adjustments to income and deductions. We address
the issues remaining for decision below.
Wages and IRA Deductions
In Rapid City, South Dakota, petitioner maintained his law
office in his residence. He had no office help outside of
whatever assistance Mrs. Haeder gave him. Mrs. Haeder usually
answered the telephone, greeted visitors, and cleaned the house,
including petitioner’s office. At his residence, petitioner
initially had only one telephone line for both business and
personal use. Eventually he had a second line installed to
accommodate a fax machine.
On a date that does not appear in the record, petitioner
decided to start paying Mrs. Haeder a salary. Petitioner did not
determine Mrs. Haeder’s salary on the basis of hours worked or
services performed; instead, he based her salary on the maximum
amount a qualified individual could deduct for qualifying
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