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Schedules C for 1983, 1984, and 1985 included advertising
expenses of $4,029, $4,109, and $5,109, respectively. The
Schedule C filed with the 1990 return reported no advertising
expenses. From 1988 through 1990, Katherine’s advertising
expenses included the cost of a television (T.V.) commercial that
Katherine had taped on September 28, 1988, for viewing on Fox TV
Channel 35.5 Miss Lisa Ruby began managing Katherine’s TV ad
account in late 1989, and thereafter she periodically visited
with Katherine at the Longwood property to discuss that account
and collect payment. Katherine’s TV advertising expenses
averaged approximately $3,000 per year which she always paid with
cash.
On their returns for the years in issue, Frank and Katherine
reported the following interest income, income from capital
gains, income from gambling, and adjusted gross income:
5 Katherine continued to use the television commercial
after 1990.
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