- 53 -
equal to 25 percent (25-percent limit), rather than 15 percent
(15-percent limit), of his self-employment income.37 For 1991,
the underpayment of income tax attributable to petitioner's
disallowed SEP deduction resulted from erroneously using the 25-
percent limit, rather than the 15-percent limit.
Erroneous Inclusion of the Gain From the
Sale of the Drawing in Question in
Petitioner's Self-employment Income for 1989
Based on the information that petitioner 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 Sched-
ule C of petitioner's 1989 return relating to art sales. We have
found that petitioner informed Mr. McVeigh that he sold the
drawing in question during 1989 at a gain and that he intended to
continue to purchase and sell drawings in the future.38 We do
not know what else petitioner told Mr. McVeigh about the sale of
that drawing. We have found that petitioner did not sell any
drawings, artwork, or collectibles after he sold the drawing in
question in January 1989, and petitioner testified that, after
that sale, he had no intention of continuing to sell drawings.
37 See supra note 16.
38 Petitioner contradicted Mr. McVeigh's testimony when he
testified that, after the sale of the drawing in question, he did
not tell Mr. McVeigh that he intended to continue to sell draw-
ings. We believe and accept Mr. McVeigh's testimony on this
point, and not petitioner's.
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