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Petitioner received employee wages of $6,272.50 from IIEM
for his services. Petitioner traveled 120 miles round trip from
his residence when he treated patients at Howard Community
Hospital. He bought his meals when he worked there.
4. American Research Associates, Inc.
As a result of his work at IIEM, petitioner became
interested in conducting medical research into the treatment of
hypertension. He incorporated American Research Associates, Inc.
(ARA), as a nonprofit medical research corporation in Indiana on
June 15, 1999.
To obtain funding for this medical research, petitioner
prepared and submitted several grant proposals to the National
Institutes of Health (NIH) in 1999. He did not, however, receive
any grants from NIH during 1999.
B. Petitioners' 1999 Federal Individual Income Tax Return
On April 17, 2000, petitioners filed a joint Form 1040, U.S.
Individual Income Tax Return, for 1999. Among the forms attached
to the return were Schedule A; two Schedules C; Schedule E,
Supplemental Income and Loss; Form 2106; and Form 8829, Expenses
for Business Use of Your Home.
1. Petitioners' Schedules C
a. ARA
The first Schedule C petitioners attached to their 1999 Form
1040 was for ARA, which petitioners characterized as a medical
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