Michael and Penny Rhodes - Page 7

                                        - 6 -                                         
          carrying on a trade or business.  Sec. 162(a); Deputy v. duPont,            
          308 U.S. 488, 495 (1940).                                                   
               Petitioners deducted $24,564.98 and $10,973.16 for supplies            
          for Keepsake in 1994 and 1995, respectively.  In the examination            
          of the 1994 return, Ms. Rhodes presented numerous receipts to               
          substantiate the claimed deductions.  Those receipts totaled                
          almost $31,000, $6,000 more than what was claimed on the 1994 tax           
          return.  For 1995, Ms. Rhodes’s receipts from the purported                 
          suppliers, Frank’s Nursery and Crafts, Inc. (Frank’s), alone                
          totaled $2,557.14 more than the amount claimed for supplies on              
          that year’s return.                                                         
               When respondent’s examining agent questioned Ms. Rhodes                
          about her receipts, she claimed to have purchased the bulk of her           
          supplies from Frank’s, a significant amount from a craft store              
          named the Silk Shop, and the remainder from various stores such             
          as Michael’s or Wal-mart.                                                   
               With respect to purchases at Frank’s, Ms. Rhodes submitted             
          to the examiner and entered into evidence at trial purchase                 
          orders from 1994 and 1995 totaling $24,076 and $13,530.30,                  
          respectively.  The purchase orders were generic and bore Frank’s            
          name and address typed in the upper left-hand corner.  The                  
          transactions were handwritten and reflected that Ms. Rhodes paid            
          cash in amounts between $2,500 and $9,000 to an individual                  
          referred to as “C.O.” for flowers, greenery, and other craft                






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011