Eugene C. Joseph, Sr. - Page 3

                                                - 3 -                                                 
                  In connection with petitioner's business, petitioner claimed                        
            on his 1986 Federal income tax return the following income1 and expenses:                 
                  Gross receipts                            $37,850                                   
                  Advertising                                           $2,480                        
                  Bank service charges                                  69                            
                  Car and truck expenses                                6,980                         
                  Commissions                                           4,440                         
                  Dues and publications                                 990                           
                  Freight                                               140                           
                  Insurance                                             1,400                         
                  Legal and professional services                       600                           
                  Office expense                                        798                           
                  Rent on business property                             2,400                         
                  Repairs                                               2,006                         
                  Supplies                                              985                           
                  Taxes                                                 398                           
                  Travel and entertainment                              698                           
                  Utilities and telephone                               1,295                         
                  Airline travel                                        1,490                         
                  Hotel                                                 895                           
                  Answering service                                     185                           
                  Taxi and bus                                          390                           
                        Total expenses                            $28,639                             
                  Respondent determined that all of petitioner's claimed                              
            business deductions were disallowed for lack of substantiation.                           
            Petitioner kept records of his business expenses for 1986;                                
            however, these records were destroyed in a fire in Trenton, New                           
            Jersey, in 1988 or 1989.                                                                  
            Business Deductions                                                                       
                  Respondent disallowed all of petitioner's claimed business                          
            deductions for lack of substantiation.  Petitioner asserts that                           
            he is entitled to deduct the entire amount of $28,639.                                    


                  1                                                                                   
                        Petitioner further reported interest income of $277 and                       
            gambling winnings of $782 for 1986.                                                       




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