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prepared profit and loss statements for the years subsequent to
those before the Court.
Mrs. Holowinski summarized the antique glassware sales
activity as follows:
Very few people know that we deal in antiques. There's
no sign at the house -- first of all, because of where
we live, we couldn't have a business.
So * * * [the business is] very low-keyed, we keep
a low profile, and it's only through the mail or when
we go on these conventions * * *.
On their 1992, 1993, and 1994 Federal income tax returns,
petitioners reported losses from the antique glassware sales
activity in the amounts of $9,504, $12,734, and 11,664,
respectively. In summary, the losses were computed as follows:
1992 1993 1994
Sales $264 $1,583 $2,253
Cost of Goods Sold 170 973 1,453
Gross Profit 94 610 800
Expenses:
Commissions and fees2 63 165 110
Car, truck & travel 7,391 10,626 9,665
All other expenses 2,144 2,553 2,689
Net Loss (9,504) (12,734) (11,664)
In the notice of deficiency respondent determined that
petitioners were not entitled to deductions for the net losses
listed above because their antique glassware sales activity was
2 The commission expenses are listed in the amounts reported on
petitioners' tax returns for the years in issue. We recognize
that these numbers do not square with the reported sales figures
and the formula provided by petitioners for computing commissions
on showcase sales. We speculate that petitioners may have sold
some items and incurred commissions at auctions and at antique
conventions they attended.
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Last modified: May 25, 2011