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ation and section 179 expense deduction” with respect to the
Dodge van, $860 for “Insurance”, $1,100 for “Taxes and licenses”,
and $155 for “Other expenses”. Under “Other Expenses”, petition-
ers claimed $50 for “GASOLINE”, $35 for “INSPECTION”, and $70 for
“REGISTRATION”. In the 2004 Schedule C, petitioners claimed a
net loss of $6,383. In determining the taxable income reported
in their 2004 return, petitioners deducted that net loss.
In determining adjusted gross income for their taxable year
2003, petitioners claimed on page 1, line 26, of the 2003 return
a “Tuition and fees deduction” (tuition and fees deduction) of
$633.
On April 14, 2006, respondent issued to petitioners a notice
of deficiency (notice) with respect to their taxable years 2001
through 2004. In that notice, respondent, inter alia, disal-
lowed: (1) Petitioners’ respective unreimbursed employee ex-
penses of $4,792, $2,300, $2,300, and $2,300 claimed in the 2001
Schedule A, the 2002 Schedule A, the 2003 Schedule A, and the
2004 Schedule A; (2) $12,284 of the cost of goods sold claimed in
the 2002 Schedule C, $5,314 of the cost of goods sold claimed in
the 2003 Schedule C, and $3,370 of the cost of goods sold claimed
in the 2004 Schedule C;3 (3) petitioners’ respective Schedule C
3Respondent allowed the cost of goods sold claimed in each
of the 2002 Schedule C, the 2003 Schedule C, and the 2004 Sched-
ule C to the extent that the claimed cost of goods sold equaled
the gross receipts or sales reported in each such Schedule C.
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Last modified: November 10, 2007