- 40 -
consumed to any extent during 1982.
Based on the foregoing, we conclude, and we have found, that
petitioner has accounted for the sources of $152,010 that was
expended by him in 1982. See supra table 4.
(3) Applications of Funds
The first item on the Applications portion of table 4,
supra, Expenditures Reflected on Schedule C in the amount of
$318,112, merely copies the amount that petitioner claims as
deductions on Schedule C of his 1982 tax return. However,
addition of the items listed on the business expenses schedule
attached to petitioner's tax return shows the correct total of
his claimed business expenses to be $318,062. Because the source
and application of funds method requires a determination of
petitioner's actual expenditures, we use as our starting point
the correct total of petitioner's claimed business expenses--
$318,062.
We agree with respondent's determinations to subtract
petitioner's claimed depreciation ($6,250) and "write-off"
($137,000) deductions, because these items do not appear to
involve 1982 expenditures of funds. As shown in table 4, supra,
this leaves net expenditures needing funds in the amount of
$174,812.
We also agree with respondent's determination in applying
the source and application of funds method to determine
petitioner's omitted Schedule C income, to take into account as
categories of expenditures (1) petitioner's purchase of assets
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