Bill J. Malone, Jr. and Sarah J. Malone - Page 2

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               For each year in issue, the issues for decision are:                   
          (1) Whether petitioners are entitled to deductions claimed on               
          a Schedule C, Profit or Loss From Business; and (2) whether                 
          petitioners are liable for an accuracy-related penalty under                
          section 6662(a).                                                            
               Some of the facts have been stipulated and are so found.  At           
          the time the petition was filed, petitioners resided in Austin,             
          Texas.  References to petitioner are to Bill Malone.                        
               Petitioners were married in 1983.  They have eight children:           
          H, R, N, B, Dn, M, Db, and J2 (collectively, the Malone                     
               Petitioner is and was at all relevant times a practicing               
          attorney, with offices in Austin, Texas.  During the years in               
          issue, he devoted an average of 35 hours per week to his law                
          practice and, in addition, was employed as a law professor at Oak           
          Brook College of Law.  Sarah Malone has a degree in education.              
          In the stipulation of facts she is described as a “homemaker”.              
          During the years in issue she “home schooled” the Malone                    
               Petitioners and their children are musically inclined and,             
          as amply demonstrated by the record, are quite talented in that             

               2  Full names of petitioners’ minor children are omitted in            
          the interest of privacy.                                                    

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Last modified: May 25, 2011