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On August 16, 1992, petitioners timely filed their Federal
income tax return for 1991 (the original return). On Schedule C
of the original return, Mr. Finnegan listed his principal
business or profession as "Construction Consultant". In
addition to other income, petitioners reported $16,793.89 in
gross receipts from the construction consulting business which
consisted of payments from (1) Columbo Construction Co. for work
on two elementary schools in Ridgecrest, California, and (2) Hil-
Gan Development Corp. for repairing an apartment building in
Tustin, California, completing a security gates contract, and
managing the apartment building in Tustin, California. The
original return showed a tax liability of $46,842.82.
Petitioners paid this amount.
On January 3, 1994, petitioners filed an amended return for
1991 (the amended return) which showed a revised tax liability of
$27,371.12 and sought a refund of $19,471.70. On Schedule C of
the amended return, which listed Mr. Finnegan's principal
business or profession as "Construction Consultant", petitioners
claimed an additional $59,186.95 of expenses (the additional
expenses).3 Petitioners incurred all of the additional expenses
3 These additional expenses are the result of petitioners'
claiming new items or increasing the amount for items claimed on
the original return. Respondent concedes that petitioners
substantiated the following amounts:
(continued...)
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