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and preparing the food. Other members of petitioner’s family
also worked at the sandwich shop.
On its 1995 Form 1120S, U.S. Income Tax Return for an S
Corporation, Submarine 21 reported income, expenses and a net
loss as follows:
Gross receipts $97,731
Cost of goods sold (39,423)
Total income 58,308
Deductions
Rents 30,804
Taxes and licenses 4,684
Depreciation 4,332
Advertising 3,574
Other deductions 18,222
Total deductions 61,616
Net loss (3,308)
Submarine 21 claimed no deduction for salaries and wages
expenses.
During 1995, petitioner maintained a brokerage account with
Charles Schwab and Co. (the brokerage account). Petitioner
engaged in numerous transactions and trades through the brokerage
account on behalf of himself and other family members. In a
series of stock dispositions (not less than 14) that occurred
between February 28 and October 23, 1995, petitioner realized a
net gain totaling $42,479.
Petitioner also maintained a personal checking account at
Valley Credit Union (the checking account). In 1995, deposits
totaling $77,485.58 were made into the checking account. Of that
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