- 5 -
On his Schedules C, petitioner claimed total deductions, as
follows:
1996 1997
Advertising $3,324 $2,849
Car and truck 6,673 5,772
Depreciation 13,303 13,176
Insurance 2,791 1,374
Interest
Mortgage 6,744 6,368
Other 3,726 3,442
Legal and professional
services 3,686 4,047
Office expense 109 396
Repairs and maintenance 8,720 - 0 -
Supplies - 0 - 2,510
Taxes and license 1,810 4,568
Travel/Meals 1,103 917
Utilities 3,643 6,008
Other expenses 1,825 1,796
Total $57,457 $53,223
It appears from an examination of these deductions that many of
them were personal, nondeductible expenses. Sec. 262. For
instance, petitioner admitted that he did not use an attorney in
the day-to-day operations of the bed and breakfast. Petitioner
claimed that there were a “lot of other issues that came up where
my ex-wife was attacking my use of the property as a bed and
breakfast.” As stated, petitioner had purchased his former
wife’s interest in the property prior to the start of the bed and
breakfast activity. He deducted part of these legal expenses on
his Schedules C.
At trial, respondent asserted that “petitioner’s bed and
breakfast activity was a homegrown tax shelter to shelter his W-2
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