Robert J. Damron - Page 4

                                        - 3 -                                         
          In the notice of deficiency, respondent disallowed the following            
          expenses:                                                                   

          Rent                $ 3,500                                                 
          Wages                 3,600                                                 
          Office expenses       5,179                                                 
          Total             $12,279                                                   

          Respondent agrees that the activity is a trade or business                  
          activity engaged in for profit and disallowed the expenses for              
          failure to substantiate the amounts claimed.  During the trial,             
          respondent conceded that petitioner was entitled to a deduction             
          for rent of $700 and $400 for wages paid that had been disallowed           
          in the notice of deficiency.                                                
               The nature of the activity is somewhat vague.  At trial,               
          petitioner gave examples of the services he provided, such as               
          assisting businesses collecting debts from customers, searching             
          courthouse records or newspapers that might provide information             
          that could lead to assets of delinquent customers, negotiating              
          with debtors, etc.  Petitioner had engaged in this activity only            
          for 2 or 3 years prior to the year at issue and had not realized            
          a profit in any of the prior years.  The sole issue in this case            
          is whether petitioner substantiated the expenses disallowed.2               

               2Because of the year involved, the examination of                      
          petitioner’s return at issue commenced after July 22, 1998.                 
          Therefore, sec. 7491, which under certain circumstances shifts              
          the burden of proof to the Commissioner, applies.  However, for             
          the burden to be placed on the Commissioner, the taxpayer must              
                                                             (continued...)           





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