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generating business.” They also stipulated that “During the 1992
tax year, Presto was not an operational 'going-concern'”.
In 1992, petitioner's Form W-2 wages were $45,128 from full-
time employment as an engineer.
The most significant expense claimed on petitioners' 1992
Schedule C is for depreciation of petitioners' entire residence
in Santa Maria, California, in the amount of $17,226.30. In
December of 1991, petitioners moved from Santa Maria to Merced,
California, where they rented an apartment closer to petitioner's
place of employment. During 1992, petitioners were attempting to
sell their Santa Maria residence. Mrs. Kukes periodically stayed
in Santa Maria to maintain the yard and residence. Most of
petitioners’ furniture and personal belongings remained at the
Santa Maria property, including petitioner’s piano, organ,
computer, and Presto work product. The cost of the Santa Maria
home in 1984 was approximately $161,000. Petitioners treated the
Santa Maria residence as their principal residence for purposes
of rolling over the gain on the sale of the home in 1994.
In addition to depreciation, on their 1992 Schedule C
petitioners deducted $238.90 for home insurance, $6,122.05 for
mortgage interest, $1,780.54 for property taxes, and $965.41 for
utilities related to their Santa Maria residence.
Addition to Tax and Penalties
Petitioners concede they filed their 1992 income tax return
late. The stipulated copy of the return shows it was received by
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