Kenneth Lee and Margaret Ihlenfeldt - Page 3




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               2.  Whether petitioner may deduct self-employment expenses             
          in amounts greater than allowed by respondent.  We hold he may to           
          the extent stated herein.                                                   
                                  FINDINGS OF FACT                                    
               Some facts have been stipulated and are so found.  The                 
          stipulated facts and the exhibits submitted therewith are                   
          incorporated herein by this reference.  At all relevant times,              
          petitioner resided in a 542-square-foot apartment in a large                
          building located on 6.7 acres of land at 5522 (A1A) N. Oceanside            
          Blvd., Palm Coast, Florida (the Oceanside Blvd. property).                  
          Petitioner purchased the Oceanside Blvd. property (inclusive of             
          the apartment) in 1976 and operated on it a sole proprietorship             
          named “Kenneth L. Ihlenfeldt d/b/a/ Delta Marine Enterprises”               
          (Delta).  Delta’s primary business activity was the building,               
          repairing, and storing of boats.  In addition to the apartment,             
          the building on the Oceanside Blvd. property contained vast space           
          for the storage of boats and boat parts, a small business office            
          with a desk and a telephone, and a second office where petitioner           
          kept business documents.                                                    
               During 1989, petitioner purchased a second property (the               
          second property) in Palm Coast, Florida.  He operated on the                
          second property a C corporation named Seven Leagues Charter, Inc.           
          He began operating in 1990 another C corporation named Omega                
          Yachts, Inc.  Petitioner performed backhoe work and land-clearing           






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