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of towels, gloves, brushes, hair spray, and rollers and owned a
blowdrier and a “bonnet” style hairdrier.
Petitioners maintained and produced certain records such as
calendars used as appointment books for 1995 and 1996,
photocopies of canceled checks, and a copy of a journal in which
petitioners noted expenses (apparently both personal and
hairdressing related) from November 1995 through the end of 1996
and mileage for Mrs. Possas’s automobile. Her appointment books
indicate that she had 276 appointments in 1995 and 347 in 1996.
Many of the appointments in her appointment books indicate the
services performed for her client (e.g., “perm”, “hilite”, and
“H/C”). She did not maintain a separate bank account for her
hairdressing activity.
Petitioners filed their Federal income tax returns for 1995
and 1996 as married filing jointly.2 Petitioners estimated the
income reported and expense deductions claimed on their returns
because they failed to keep accurate records of income or
expenses associated with the hairdressing activity. Petitioners
attached Form 2106, Employee Business Expenses, to Schedule A,
2 The record in this case does not contain a copy of
petitioners’ 1995 Federal income tax return. Rather, the record
contains an “RTVUE” for 1995. An RTVUE is the Commissioner’s
record of line items from Forms 1040, 1040A, 1040EZ, and
accompanying schedules. The RTVUE is created as the returns are
processed at the service center. We assume for purposes of this
case that items and amounts reflected on this document are
identical to petitioners’ 1995 income tax return and, for
convenience, shall refer to it as petitioners’ 1995 return.
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