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reasons explained below, we find that petitioners are not
entitled to administrative costs.
Background
Petitioners are James R. Mikes (Mikes), Deborah A. Hamilton
(Hamilton), Florida Country Clubs, Inc. (FCC), and Suncoast
Country Clubs, Inc. (SCC). FCC and SCC are corporations that
elected to be taxed under subchapter S for 1993, 1994, and 1995.
Mikes and Hamilton were married and filed joint returns for those
years, and they were shareholders of the corporations.2
Respondent commenced an audit of FCC for the years 1993 and
1994 in December 1995, to examine, inter alia, certain claimed
depreciation expenses and a possible understatement of gross
receipts. In 1996 respondent expanded the audit for those years
to include Mikes, Hamilton, and SCC. The audit encompassed, in
addition to the depreciation deductions, the deductibility of net
operating losses as well as interest income and expenses claimed
by petitioners on account of certain loans. In May 1999, the
audit was further widened to include the year 1995 for all
petitioners.
On September 23, 1997, respondent sent petitioner FCC a 30-
day letter proposing to increase the income reported on its 1993
and 1994 returns in the amounts of $1,168,554 and $44,219,
2 At the time the petition was filed, petitioners Hamilton
and Mikes resided in Florida and the principal place of business
of the corporate petitioners, FCC and SCC, was also in Florida.
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