Dennis J. and Carol R. Kraus - Page 2

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          respectively.2  The issues remaining for our consideration are:             
          (1) Whether Dennis J. Kraus (petitioner) was entitled to report             
          income and expenses on a Schedule C, Profit or Loss From                    
          Business; (2) whether petitioner is entitled to use cost of goods           
          sold in computing his gross income; (3) whether petitioner is               
          entitled to claim deductions for an office in his home; (4)                 
          whether petitioner is entitled to certain deductions claimed on             
          Schedules C; (5) whether petitioners are liable for accuracy-               
          related penalties for negligence under section 6662(b)(1); and              
          (6) whether the burden of proof is on or shifted to respondent              
          under section 7491.                                                         
                                  FINDINGS OF FACT3                                   
               At the time their petition was filed, petitioners were                 
          husband and wife and resided at Huntington Beach, California.               
          Petitioner was a member of the International Brotherhood of                 
          Teamsters, Bakery Drivers Local Union No. 952 (Local 952).  He              
          delivered bakery goods provided by the Millbrook Bread division             
          of Interstate Brands Corp. (IBC).  IBC was in the business of               

               2 Respondent determined that petitioners were liable for               
          gross valuation misstatement penalties under sec. 6662(h).  On              
          brief, respondent conceded that his determination with respect to           
          that penalty was erroneous and that petitioners are not liable              
          for any penalty under sec. 6662(h).                                         
               3 The parties’ stipulated facts are incorporated by this               

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