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conversion, they installed a furnace in the workshop.
Petitioners then spent $18,123 building a new garage in which to
house their vehicles.
Making and selling chairs did not go well in Wyoming, so
petitioners tried their hands at wood signs and carved duck
decoys. They also gave away beaded keychains as a promotional
item for their woodworking business. Ultimately, petitioners
terminated their woodworking business in 2003.
Discussion
Although only two principal issues remain in the case, we
discuss all of the adjustments made in the notice of deficiency
for the sake of clarity.
1. Schedule C--2001
After discussion and elaboration at trial, it became clear
that the bead and decoy expenses denied by respondent were
incurred by petitioners as part of their woodworking business,
and we find for petitioners on those items.
2. The Wyoming Workshop
Petitioners claimed deductions on their Federal income tax
returns for the years 2001, 2002, and 2003 related to the furnace
installation in, and business use of, the Wyoming workshop.
Unfortunately for petitioners, any deductions related to the
business use of the Wyoming workshop are limited by the
provisions of section 280A(c)(5). See also Rule 142(a); INDOPCO,
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