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and, accordingly, the compensation for his work product often
occurred months or years after the completion of a script. Due
to the speculative nature of his writing activity, every script,
proposed idea, and treatment created remained a potential income
source depending on the interest of a buyer. Therefore, Mr.
Radnitz retained all of his works and rented storage space for
such purpose. He claimed no deduction for this rental expense,
which was $120 per month.
The types of income Mr. Radnitz received from his writing
activity depended on the type of work sold and contract terms
that were negotiated. For a new story idea requiring additional
writing, Mr. Radnitz was paid in stages as each draft or script
was completed. In the case of more speculative projects, he
received payment only when a buyer was found for a finished work.
Mr. Radnitz also received royalty and residual payments, referred
to as income from residuals, for reruns of shows he had written
in the past. During the years at issue, he also received income
from a pension fund established by the Writer’s Guild.
Mr. Radnitz reported taxable pension income of $34,550 and
$41,329, respectively, in 1997 and 1998, none of which is at
issue in this case. He received wage income from residuals of
$980 in 1997 and $1,503 in 1998. He did not receive income from
current writings during 1997 and 1998, as he was drafting
speculative screenplays during those years. Mrs. Radnitz
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