Jeffrey D. and Bonita L. Woodlee - Page 3

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               Respondent determined a deficiency of $7,615 in petitioners’           
          1994 Federal income tax.  The issue for decision is whether                 
          petitioners are entitled to a deduction for certain accrued but             
          unpaid business expenses.                                                   
               Some of the facts have been stipulated and are so found.               
          Petitioners are husband and wife.  They filed a timely joint 1994           
          Federal income tax return which was prepared by a professional              
          income tax return preparer.  At the time that the petition was              
          filed, they resided in Beech Grove, Indiana.  References to                 
          petitioner are to Jeffrey D. Woodlee.                                       
               During 1994, petitioner was the sole proprietor of Specialty           
          Insulators (Specialty), a business engaged in the installation of           
          insulation in commercial and residential buildings.  Business               
          income was deposited into, and business expenses were paid from,            
          a separate checking account maintained by petitioner for such               
              Included with petitioners’ 1994 return is a Schedule C,                
          Profit or Loss From Business, on which the income and deductions            
          attributable to Specialty are reported as follows:                          

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