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entitlement to certain business deductions; (2) whether
petitioners are entitled to claim a bad debt loss; and (3)
whether petitioners are liable for an accuracy-related penalty.
FINDINGS OF FACT
At all times pertinent to this case, petitioners were
married and resided in Clarendon Hills, Illinois. Petitioners
filed a joint 1999 Federal income tax return, which they prepared
themselves. On that return, they reported $85,355 in wages and
$461 in interest income. They also claimed $81,289 as a business
loss. That loss was shown on a Schedule C, Profit or Loss from
Business. Randy L. Crosson (petitioner) was reflected on the
Schedule C as a “Special Trade Contractor” who operated the
business on the cash method for reported income and deductions.
No income was reported on the Schedule C, and the claimed $81,289
loss comprised $58,067 in bad debts, $12,374 in car and truck
expenses, and the remainder in various expense categories, as
follows: $420 in legal and professional services, $116 in office
expenses, $299 in vehicle or equipment rent, $357 in supplies,
$1,655 in taxes and licenses, $312 in travel, $2,018 in meals and
entertainment, $4,046 in utilities, and $1,625 in other expenses.
Petitioners did not itemize deductions on the Schedule A,
Itemized Deductions; instead, they used the standard deduction.
The wages and the claimed loss coupled with the standard
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