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expenses, 31.64 percent of the amounts that we have held were
unreported escort income for 1989.
Petitioner asserts and respondent concedes that during 1989
petitioner incurred rental expenses of $7,763 and an electricity
expense of $302 with respect to the apartment on E. 65th Street,
at which petitioner’s escort business was conducted. We hold
that she is entitled to deduct these amounts as business expenses
in 1989.
During 1989, petitioner lived in the apartment at E. 77th
Street. She had a room in that apartment in which she conducted
office business and in which, to some extent, escort services
were provided. She now claims one-third of the rentals paid for
that apartment during 1989 as a home office deduction.
In general, a taxpayer is not entitled to deduct any
expenses related to the use of a dwelling unit used by the
taxpayer as a residence during the taxable year. See sec. 280A.
The statute provides an exception to this general rule, however,
if the expenses are allocable to a portion of the dwelling which
is used exclusively on a regular basis as the principal place of
business for the taxpayer’s trade or business. Petitioner’s
claims that the room was used exclusively for business purposes
and that it was her principal place of business rest entirely on
her own testimony which, as we have concluded elsewhere, should
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