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for 1995 and 1996, respectively. After concessions,2 the issue
for decision is whether petitioners are entitled to deductions
for certain amounts that Mr. Stewart paid to a wholly owned
corporation for general management services he performed.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time of filing the
petition, petitioners resided in San Jose, California.
Petitioner Robert M. Stewart owned a real estate business,
which he operated as a sole proprietorship. In 1984, Mr. Stewart
incorporated R.M. Stewart, Inc., and he was its sole shareholder
and director. The corporation was formed to protect the assets
of the sole proprietorship, including the real estate sales
office.3 It was engaged in real estate development, a screen
printing sign business, and the operation of a computer company.
2Petitioners concede the adjustment to car and truck
expenses of $4,313 and the adjustment to interest expense of
$3,430 for 1995; respondent concedes the adjustment to rent
expense of $1,735 for 1995 and $20,000 of the adjustment for
commission expenses for 1996.
3The corporation also provided property management services
to certain clients of the sole proprietorship. The clients were
required to list their properties with the sole proprietorship
when and if the properties came up for sale. The sole
proprietorship was prohibited by its franchise agreements from
performing those services. The corporation paid a property
manager for managing the various rental properties involved;
however, he did not provide general management services for
either the corporation or the sole proprietorship.
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