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After concessions by both sides,2 the issues for decision3
2 Respondent concedes that petitioners are entitled to
deduct as 1995 Schedule A, Itemized Deductions, the $58 paid by
Michael for Louisiana income tax and the $10,133 of mortgage
interest paid. Both petitioners had claimed the standard
deduction for married filing separate on their 1994 and 1995 tax
returns. On brief, petitioners argue that they also are entitled
to deduct the $24.90 paid for real property taxes. On brief,
respondent concedes deductibility of this amount.
Respondent concedes that petitioners are entitled to deduct
$972 of the $1,871 disallowed Schedule C, Profit or Loss From
Business, telephone expenses for 1994; petitioners concede the
remaining $899. Respondent concedes that petitioners are
entitled to deduct $744 of the $1,618 disallowed Schedule C
telephone expenses for 1995; petitioners concede the remaining
$874.
Petitioners concede the entire $1,246 inventory adjustment
for 1995.
Respondent concedes that petitioners are entitled to
additional Schedule C car and truck expense deductions for 1994
and 1995 in the amounts of $2,318 and $1,337, respectively.
Respondent also concedes that petitioners are entitled to an
additional $6,348 depreciation expense deduction for 1995 on the
Ford F250 truck.
Respondent concedes that petitioners are entitled to deduct
additional Schedule C expenses for 1994 and 1995 in the amounts
of $461 and $530, respectively.
In the notices of deficiency, respondent disallowed in full
the deductions for Schedule C travel and entertainment expenses.
Petitioners acknowledge on brief that they lack the requisite
documents “to enable these expenses to be deductible.”
Petitioners contend that they “did incur these expenses * * *.
However, Mr. Downing simply did not know that he was required to
keep a detailed log of who he went to lunch with, and what
business they discussed.” We treat this as petitioners’
concession of the adjustment and, in effect, of the applicability
of sec. 6662.
Petitioners concede that Michael underreported 1995 plumbing
business gross receipts by $5,781. That is, the 1995 tax return
(continued...)
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