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1982 1983
Schedule C Receipts $86,559 $224,331
Schedule C Expenses (50,783) (62,708)
Interest Income 610 2,927
Personal Exemption (1,000) (1,000)
Total Adjustments $35,386 $163,550
Self-employment Tax 3,029 3,338
In determining petitioners' Schedule C receipts, respondent
allowed for nontaxable transfers in the amounts of $15,600 and
$102,500 for 1982 and 1983, respectively, and other miscellaneous
nontaxable items. When determining 1983 expenses, respondent
analyzed items paid from the Park Bank account only and failed to
consider any items paid from the Indian Rocks account.
Respondent attributed 100 percent of the income and expenses as
listed above to each petitioner, and treated each as married,
filing separately. On March 23, 1994, respondent issued two
notices of deficiency for the years at issue, one to each
petitioner.
Discussion
Schedule C Gross Receipts and Expenses
Bank deposits are prima facie evidence of income. DiLeo v.
Commissioner, 96 T.C. 858, 868 (1991), affd. 959 F.2d 16 (2d Cir.
1992) and cases cited therein. When using the bank deposits
method of reconstructing income, respondent must take into
account any nontaxable source of income and deductible expense of
which respondent has knowledge. Id. In respect of the
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