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itemized deductions claimed in the 1999 Schedule A that were not
subject to the two-percent floor imposed by section 67(a).
Petitioner included Schedule C, Profit or Loss From Business
(1999 Schedule C), as part of his 1999 return. In that schedule,
petitioner showed his “Principal business or profession, includ-
ing product or service” as “COMPUTER CONSULTING” and his “Busi-
ness name” as “POWERPOINT CONSULTING”. In the 1999 Schedule C,
petitioner showed gross income of $2,000 and claimed total
expenses of $13,563 and a net loss of $11,563. The claimed total
expenses in the 1999 Schedule C included as an expense for “Legal
and professional services” $5,000 ($5,000 claimed legal expense)
of the $5,500 that petitioner paid to Mr. Christie to represent
him in defending against the criminal charges. In determining
the taxable income reported in petitioner’s 1999 return, peti-
tioner deducted the total (i.e., $11,563) net loss that peti-
tioner claimed in the 1999 Schedule C.
On August 4, 2005,2 respondent issued to petitioner a notice
of deficiency (notice) for his taxable year 1999. In that
notice, respondent disallowed, inter alia, the $5,000 claimed
legal expense in the 1999 Schedule C. In the notice, respondent
2The parties stipulated that respondent issued the notice to
petitioner on May 31, 2005. That stipulation is clearly contrary
to the facts that we have found are established by the record,
and we shall disregard it. See Cal-Maine Foods, Inc. v. Commis-
sioner, 93 T.C. 181, 195 (1989). The record establishes, and we
have found, that respondent issued the notice to petitioner on
Aug. 4, 2005.
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