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Third, the record contains a “Citation and Notification of
Penalty” from the State of California Department of Industrial
Relations, Division of Occupational Safety and Health, for
violations of the California Labor Code. In this notice of
October 2, 1996, the agency cites multiple deficiencies in the
EJX facility and working environment. Yet the record is again
devoid of any proof of payment. Given that another State
assessment issued the same date and discussed above remained
unpaid in 1997, we are unwilling to assume that this penalty was
paid during 1996. Petitioners have not substantiated an
expenditure.
Fourth, the evidence includes an agreement between EJX and
the U.S. Department of Labor settling alleged violations of the
Fair Labor Standards Act. Therein, the EJX agreed “to pay back
wages” of $3,557. Additionally, copies of receipts reflecting
payments to the Department of Labor totaling $3,557 have been
made a part of the record. Nonetheless, even if this settlement
is more appropriately viewed as a deductible wages expense,
rather than a nondeductible penalty, no further deduction is in
order here. Once again, respondent’s allowance for wages is
large enough to cover this additional amount.
E. License
Petitioners claimed on their Schedule C $803 for taxes and
licenses. Respondent disallowed this expense in full. However,
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