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the amount of $16,028.03, and interest income of $70.83, for
total adjusted gross income of $16,098.06.
Petitioner and Sandra initially filed a joint Form 1040,
U.S. Individual Income Tax Return, for 1990. The gross income
reported on the 1990 return as originally filed was $19,607.
This return failed to report losses from petitioner's dog kennel
on a Schedule C, Profit or Loss From Business (Sole
Proprietorship).
After filing the return, petitioner prepared a Form 1040X,
Amended U.S. Individual Income Tax Return, for 1990. Petitioner
changed his filing status to "married filing separate return".
Attached to the return was a Schedule C reporting gross receipts
or sales of the dog kennel business in the amount of $806, and
total expenses of $10,291, for a net loss of $9,685 for the
kennel. The gross income included on petitioner's 1990 amended
return, including gross receipts from his dog kennel business and
excluding Sandra's separate income, was $19,609.
H. Petitioner's Interviews With Respondent's Agent
Sometime in 1992, Revenue Agent Rhonda Hensley (Hensley)
contacted petitioner as part of a compliance check initiated as
the result of a cash transaction report filed with the IRS by the
car dealership. Hensley examined petitioner's tax returns for
1989 and 1990 at petitioner's home in August 1992. During the
interview, petitioner told Hensley that he had acquired the money
to purchase the Corvette through his efforts to save at least 10
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