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engaged in the trade or business of recording and producing music
during 1996 and whether he is liable for the addition to tax.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner resided in Detroit, Michigan, at the time he
filed his petition. Petitioner’s primary employment for the year
in issue was as an engineer.
Petitioner has written and recorded music since at least
1985. Between 1985 and 1996, petitioner occasionally sent taped
recordings of his music to various record companies in the hopes
of obtaining a recording contract. Petitioner recorded these
tapes at a local recording studio. Petitioner saved receipts
from some of these visits to the recording studio, specifically
those from late 1987 and early 1988, which total approximately
$615. In 1996, petitioner spent $20,462 to purchase and install
professional recording equipment in his home.
Petitioner filed his Form 1040, U.S. Individual Income Tax
Return, for 1996 on January 8, 2004. Petitioner reported gross
wages of $95,246 from his employment as an engineer in 1996. He
claimed the $20,462 that he spent to purchase and install the
home recording equipment as an expense related to his business as
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