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office space from the corporation. Petitioner explained that
although WTS was a home-based business, he wanted more
professional surroundings when he met WTS clients. WTS paid one-
half of the rent for the Sacramento office.
The corporation reported gross receipts of $922,843 in
2001. WTS had no gross income during the years at issue. On
their jointly filed 2000 and 2001 Federal income tax returns,
petitioners claimed WTS-related expense deductions totaling
$45,520 and $18,353, respectively.3 Respondent issued a notice
of deficiency for each year disallowing the deductions in full.
Before trial, petitioners conceded certain expense deductions but
also claimed additional expense deductions beyond those claimed
on their tax returns. Petitioners now claim the following
Schedule C expense deductions:4
2000 2001
Advertising $248 ----
Car and truck 6,085 $6,085
Commissions and fees 38,372 ----
Rent 852 12,973
Supplies 2,236 1,030
Travel ---- 2,018
Meals and entertainment 571 1,926
Utilities 897 1,717
Totals 49,261 25,749
3 The $18,353 figure includes $12,488 that petitioners
originally claimed as unreimbursed employee business expenses on
Schedule A, Itemized Deductions, but which they now claim as
additional Schedule C expense deductions.
4 All amounts are rounded to the nearest dollar.
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