Robin F. and Anne F. Jenkins - Page 8

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            A itemized deductions  rather  than  Schedule  C  deductions.                              
            Petitioner deducted the aforementioned expenses on Schedule C of                           
            their 1986 return because Schedule C provided them with greater tax                        
            savings.                                                                                   
                  Respondent determined that petitioners underreported their                           
            income during each of the years in issue by:  (1) Underreporting                           
            petitioner's masonry business receipts; (2) inflating business                             
            deductions; and (3) changing Schedule A deductions to Schedule C                           
            expenses.                                                                                  
            1985 Loan Application                                                                      
                  In 1985, petitioner applied for a loan at the First American                         
            Savings and Loan Association (First American).  On the application                         
            form, petitioner listed his income as $4,000 a month.  He listed                           
            $118 of monthly inheritance interest, and reported cash assets of                          
            approximately $40,000.  The inheritance interest income was not                            
            reported on petitioners' Federal income tax returns for the years                          
            under consideration.  Petitioners' 1983 and 1984 tax returns were                          
            attached to the bank loan application.  First American denied                              
            petitioner a loan.                                                                         
                  Petitioner wrote a letter to First American following the                            
            denial of the loan.  In the letter, he provided First American with                        
            profit information for the first eight months of 1985.  He reported                        
            gross profit of $57,566 and net profit of $36,788.  Petitioner                             
            obtained these figures using his brown books.                                              






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