Dale H. Sundby and Edith Littlefield Sundby - Page 8

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          their petition, petitioners did not address this underlying                 
          adjustment in the petition, at trial, or in their brief.  We                
          therefore consider the issue to have been abandoned by                      
               The sole dispute in this case is whether petitioners are               
          entitled to the Schedule C deductions claimed in 1994.  If                  
          petitioners are entitled to the deductions, they are also                   
          entitled to the NOL carryback to 1991.  Petitioners’ primary                
          arguments at trial and in their brief can be summarized as                  
          follows:  Petitioner was engaged in a trade or business outside             
          of the corporations that he owned, and the Schedule C expenses              
          are his individual expenses rather than those of a corporation;             
          or, in the alternative, because Navis was an S corporation, all             
          of its expenses should have passed through to petitioner,                   
          allowing petitioners to deduct those expenses on their individual           
          return.  Petitioners also argue that they are entitled to                   
          Schedule C deductions in amounts greater than those claimed on              
          their return.                                                               
               A taxpayer generally may not deduct personal, living, and              
          family expenses.  Sec. 262(a).  Expenses that are ordinary and              
          necessary in carrying on a trade or business of the taxpayer, on            
          the other hand, generally are allowed as deductions to the                  
          taxpayer in the year in which they are paid or incurred.  Sec.              
          162(a).  A taxpayer is engaged in a trade or business if the                

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