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Respondent made the following adjustments to petitioners'
income:
Item 1985 1986 1987
Interest income $519 $31,342 ($55,660)
Capital gain -- -- 13,062
Schedule F gross receipts 457,293 514,264 378,168
Net operating loss 38,201 25,225 --
Respondent allowed an investment tax credit in the amount of
$38,077 for 1985. Respondent determined self-employment tax on
the Schedule F income for each of the years in issue. Respondent
mailed a notice of deficiency for 1985 through 1987 to
petitioners on September 21, 1993.
For 1988 and 1989, respondent used the bank deposits method
to determine Mr. Gandy's income. Respondent mailed a notice of
deficiency for the taxable years 1988 and 1989 to Mr. Gandy on
September 21, 1993. In the notice of deficiency, respondent made
the following adjustments:
Item 1988 1989
Schedule F gross receipts $217,500 $521,975
Net operating loss -- 401,239
Respondent determined self-employment tax on the Schedule F
income for both years.
By amendment to answer, respondent revised adjustments to
income as follows:
Item 1988 1989
Schedule F gross receipts $232,068 $293,203
Net operating loss -- 401,239
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