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Respondent determined a deficiency in petitioners’ 1994
Federal income tax in the amount of $1,328 and an accuracy-
related penalty under section 6662(a) in the amount of $266.
The issues for decision are: (1) Whether petitioner Rick
Richards (Mr. Richards) conducted his writing activity with the
objective of making a profit within the meaning of section 183;
if so, (2) whether petitioners have substantiated the ordinary
and necessary business expenses of this activity; (3) whether
petitioner Ruth Baime Richards (Mrs. Richards) conducted her
actress-model activity with the objective of making a profit
within the meaning of section 183; if so, (4) whether petitioners
have substantiated the ordinary and necessary business expenses
of this activity; (5) whether petitioners are entitled to carry
forward a net operating loss from a prior tax year; and (6)
whether petitioners are liable for the accuracy-related penalty
under section 6662(a).
No stipulation of facts has been filed. At the time their
petition was filed, petitioners resided in Palm Springs,
California.
On Schedule C, Profit or Loss From Business, filed with
their 1994 income tax return, petitioners reported $1,574 in
gross income2 and the following expenses: (1) “Allowable
2 The actual amount of gross income is $1,674, but $100 of
this amount was reported on line 7 of the return as wages.
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