- 5 -
Initially, petitioner commuted between Memphis and Knoxville
either by automobile or by commercial airline. Both methods
proved to be time consuming and costly. Petitioner made a
cost/benefit analysis from which he concluded it would be more
economical to purchase an airplane to make the weekly commute
between Knoxville and Memphis. Accordingly, petitioner, in early
October 1996, purchased a Cessna model 192 airplane and, after
paying for flying lessons, thereafter used the plane to commute
between Memphis and Knoxville.
Petitioner's contract with Josten's was completed in
November 1996, and he had no further contractual or employment
relationship with Josten's. Petitioner then gave up the Memphis
apartment and continued living with his girlfriend at Knoxville.
He did not find employment at Knoxville. In March 1997, the
relationship between petitioner and his girlfriend terminated.
Petitioner moved back to Austin, Texas, and found employment
there.
On his Federal income tax return for 1996, petitioner
reported the income and expenses of the contract activity with
Josten's as a trade or business activity, which respondent does
not dispute. Petitioner reported gross income of $216,616,
expenses of $198,677, and a net profit of $17,939. In the notice
of deficiency, respondent disallowed deductions claimed for
expenses in the amount of $40,023. The disallowed deductions
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