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unit which is exclusively used on a regular
basis--
(A) as the principal place of business for
any trade or business of the taxpayer,
(B) as a place of business which is used
by patients, clients, or customers in meeting
or dealing with the taxpayer in the normal
course of his trade or business, or
(C) in the case of a separate structure
which is not attached to the dwelling unit,
in connection with the taxpayer’s trade or
business.
In the case of an employee, the preceding sentence
shall apply only if the exclusive use referred to
in the preceding sentence is for the convenience
of his employer.
(2) Certain storage use.-- * * *
(3) Rental use.-- * * *
B. Amortization of Residence Improvements
The parties stipulated as follows: “KareMor expended monies
for lavish improvements to PETITIONERS’ personal residence.
Based upon those expenditures KareMor claimed amortized expenses.
RESPONDENT does not dispute the amounts claimed but disputes the
deductibility.” Petitioners seek deductions of $313,576 for
1996, $549,028 for 1997, and $566,559 for 1998.
Both petitioners and respondent devote extensive discussion
on brief to whether the expenditures by KareMor for improvements
satisfy the threshold business purpose criterion pertinent to
deductibility under either section 162 or 167. Respondent argues
that the amounts were not expended for ordinary and necessary
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