Edward L. and Terri L. Pyrdum - Page 3

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               Respondent determined deficiencies and accuracy-related                
          penalties under section 6662(a) in petitioners’ 1999 and 2000               
          Federal income taxes in the following amounts:                              
                    Year           Deficiency     Sec. 6662(a) Penalty                
                    1999           $6,783         $1,356.60                           
                    2000           10,565              2,113.00                       
          The issues are (1) whether petitioners are entitled to deductions           
          on Schedule C, Profit or Loss From Business, for expenses of                
          $21,194 and $30,178 for the years in issue, and (2) whether                 
          petitioners are liable for the accuracy-related penalties under             
          section 6662(a).  Petitioners resided in Shelbyville, Tennessee,            
          at the time the petition was filed.                                         
                                     Background                                       
               The facts may be summarized as follows.  On Schedule C                 
          included in their 1999 and 2000 Federal income tax returns                  
          petitioners claimed the following deductions:                               
                                             1999           2000                      
               Car & truck expenses     $10,844        $16,268                        
               Mortgage interest             -0-            6,767                     
               Depreciation             4,125               -0-                       
               Supplies                      750            375                       
               Travel                   2,750               1,265                     
               Meals                    325                 238                       
               Utilities                     2,400          4,136                     
               Business use of home     -0-                 1,129                     











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