- 17 -
Net profit from
Psychological
Testing Services 7,372 34,930 104,371
Schedule D capital gain 18,339 -- 1,373
Schedule E loss for 1989
and income for 1991 2,200 -- 4,317
Schedule F loss 10,253 7,780 19,588
Deduction for one-half of
self-employment tax -- 176 558
Deduction for SEP
contribution 20,000 16,912 26,00010
With respect to the $99,000 net profit that petitioner
reported in Schedule C of his 1989 return relating to art sales,
petitioner informed Mr. McVeigh that he sold the drawing in
question during 1989 at a gain. Mr. McVeigh advised petitioner
that an important factor in characterizing that gain as self-
employment income was whether petitioner continued to purchase
and sell drawings in the future. Petitioner informed Mr. McVeigh
that he intended to do so. Based on the information that peti-
tioner provided to Mr. McVeigh, Mr. McVeigh concluded that the
gain from the sale of the drawing in question constituted self-
employment income, and not long-term capital gain, and that it
should be reported in a Schedule C of petitioner's 1989 return
relating to art sales.
With respect to the automobile expense deductions claimed in
Schedules C of petitioner’s returns for the years at issue
relating to Psychological Testing Services, petitioner gave Mr.
10 Although petitioner's 1991 return erroneously showed that
deduction as a deduction for "self-employed health insurance",
the parties agree that that deduction was for petitioner's 1991
SEP contribution.
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