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By notice of deficiency, respondent allowed petitioner a
dependency exemption deduction for her mother and permitted
filing as head of household, but respondent disallowed the
dependency exemption deductions and related child tax credits for
the three children.
B. Schedule C Deductions
Petitioner attached a Schedule C to each of her returns for
1999 and 2000 to reflect the results of the secretarial and
administrative services business she conducted under the name of
Debra’s Secretarial Services.
Most of the receipts petitioner reported on Schedule C for
1999 were for administrative and secretarial tasks for the pastor
of a church. On her 1999 Schedule C, petitioner reported a net
loss of $6,693 for Debra’s Secretarial Services, based on gross
income of $2,507 less deductions of $9,200. The deductions
consisted of the following expenses: $205 for advertising,
$4,752 for rented or leased vehicle expenses, $2,390 for repairs
and maintenance, and $1,845 in supplies. During the examination
of her 1999 return, petitioner conceded that her 1999 Schedule C
contained many errors, such as the deduction for leased vehicle
expenses although petitioner admitted that she never leased a car
in 1999. As stated previously, with assistance from her
authorized representative, Clark, petitioner prepared a draft
amended 1999 return that was used for discussion and settlement
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