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1989 and $167,669 for the year 1990.4 Actually the notice of
deficiency listed all of the deduction categories, including the
labor and materials (purchases) items described on the returns as
cost of goods sold, simply as Schedule C expenses. For 1989
respondent reduced purchases from $10,760 to $8,420 and reduced
subcontract labor from $8,853 to $7,706. For 1990 respondent
increased cost of labor from $53,300 to $67,388 and reduced
materials and supplies from $73,239 to $34,344.
Of the 13 categories of Schedule C expenses (not including
depreciation) reported in 1989, respondent reduced the allowable
expenses in six categories by a total of $7,514 and increased
four categories by a total of $4,185, for a net reduction of
$3,329. Of the 18 categories of Schedule C expenses (not
including depreciation) for 1990, respondent decreased eight
categories by a total of $52,557 and increased six categories by
a total of $28,704, for a net reduction of $23,853. Respondent
also identified $3,063 of personal expenses for insurance and
4 The Court does not read this as a stipulation that Mr.
Womack's property services business in fact involved cost of
goods sold. See Velinsky v. Commissioner, T.C. Memo. 1996-180,
where on the facts of that case the Court concluded that there
was indeed cost of goods sold. On the record in the present
case, the Court concludes that the income of the business is
derived from performance of services, principally lawn care
services. The record does not indicate that Mr. Womack
maintained any inventories or sold goods to customers or clients.
To the extent that the stipulation can be read as showing that
this case involves cost of goods sold, the Court will disregard
the stipulation as a legal conclusion unsupported by the factual
record.
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