- 17 -
The interest claimed on petitioners’ Schedules E for 1990
and 1991 was attributable to petitioners’ South Coast Thrift
loan.
Notices of Deficiency
On November 27, 1995, respondent sent petitioners a notice
of deficiency for 1993. On December 8, 1995, respondent sent
petitioners a notice of deficiency for 1992.
In the notices of deficiency, respondent disallowed all the
Schedule C expenses petitioners deducted for 1992 and 1993.
Respondent determined that the expenses (1) had not been
substantiated, (2) had not been established to be ordinary and
necessary business expenses, or (3) were startup expenses,
because petitioner’s restaurant had not yet opened for business.
Respondent also disallowed the entire Schedule E loss
petitioners deducted for 1992. Respondent determined that the
Schedule E loss had not been either substantiated or established
to be deductible. As to the 1993 Schedule E loss petitioners
deducted, respondent disallowed: (1) All the expenses that
petitioners claimed from the 5401-9 S. Broadway property, except
for 6 percent of the $19,652 of depreciation and 6 percent of the
$18,000 of legal expense; (2) all the expenses that petitioners
claimed from the 5415 S. Broadway property; and (3) all $1,345 of
the unallowed prior year passive losses that petitioners claimed.
Among other things, respondent determined that only 6 percent of
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011