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1995 Federal income tax and an accuracy-related penalty under
section 6662 of $1,145 for taxable year 1995.
The issues for decision are: (1) Whether petitioners were
engaged in a trade or business or an activity for the production
of income during the year in issue; (2) if so, whether
petitioners’ claimed expenses are ordinary and necessary; and (3)
whether petitioners are liable for negligence penalties pursuant
to section 6662.
Background
The stipulation of facts and the accompanying exhibits are
incorporated herein by reference. Petitioners resided in
Portland, Oregon, at the time the petition in this case was
filed.
Petitioners were husband and wife in 1995 and filed a joint
Federal income tax return for the taxable year. Petitioner
Jefferry Phuong Vo (petitioner), along with two friends, formed a
partnership and designed a system in 1992 to use solar energy to
generate electricity to run household appliances. They rented a
three bedroom residential property located at 1770 Caloosa Court,
San Jose, California (San Jose property), in which to develop and
apply the solar-powered electric generator (generator).
Petitioners claim that they needed a large unobstructed yard with
sufficient sunlight to meet their solar needs and that the
residential property was less expensive than a commercial
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