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During the subject years, three of petitioner's customers
lived in Pennsylvania, two lived in Florida, and seven lived in
Texas. In addition, all of petitioner's extended family live in
those three States, including her parents, who live in San
Antonio, Texas.
Petitioner owned a Dodge Caravan that she used in her Mary
Kay activity. For the year 1996 she maintained a mileage log for
her use of the Caravan. The log consisted of a notebook
containing dates, odometer readings, and daily mileage driven.
During 1996 petitioner, accompanied by her children and sometimes
her husband, made several trips to Pennsylvania, Dallas and San
Antonio, Texas, and Florida. She recorded the trips in her log
and deducted the mileage on the Schedule C, Profit or Loss From
Business, attached to her 1996 Federal income tax return.
Petitioner did not produce any log for 1997 or 1998, nor did she
provide substantiation for Schedule C expenses in those years.
Petitioner did not maintain a separate checking account for her
Mary Kay activity for any year.
Petitioner reported returns and allowances plus cost of
goods sold (COGS) in excess of gross receipts on Schedule C for
1996 and 1997 for her Mary Kay activity. For 1998 petitioner
reported gross income, gross receipts exceeding returns and
allowances plus COGS, of $438. Net reported business losses for
the 3 years were $19,300, $21,308 and $9,132. Included in
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