Henry Peter Novick and Carolyn S. Novick - Page 7

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                  The office and storage expenses relate to Dr. Novick's use of                        
            petitioners' residence to store medical records and equipment from                         
            Dr. Novick's previously dissolved professional corporation.                                
            (During the years under consideration, Dr. Novick did not conduct                          
            his medical practice, nor did he see patients, in his home.)  The                          
            stored medical records were those of so-called inactive patients --                        
            patients that Dr. Novick had not seen within 3 years.  The medical                         
            equipment stored in petitioners' residence was equipment that Dr.                          
            Novick had used in his prior medical practice and was not needed by                        
            Sacramento Sierra Medical Group, Dr. Novick's employer during all                          
            years under consideration. Petitioners determined that 30 percent                          
            of their home was used for storage of Dr. Novick's medical records                         
            and equipment.  They calculated the office/storage expenses by                             
            taking 30 percent of their home  mortgage payments, interest,                              
            taxes, insurance, maintenance, and utilities.  Petitioners also                            
            claimed a deduction for home mortgage interest and real estate                             
            taxes on Schedule A of their tax returns, thereby double counting                          
            these items. The parties stipulated that petitioners' home                                 
            office/storage was not for the convenience of Sacramento Sierra                            
            Medical Group.                                                                             
                  The automobile expenses relate to an automobile that Mrs.                            
            Novick purportedly used to transport medical files, charts, and x                          
            rays from petitioners' home to Dr. Novick's medical office.                                









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