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tax auditor. We are convinced that in order to offset his State
of California wage income, petitioner merely manipulated
fictitious figures on his Federal income tax returns, including
1993, to make it appear that he was operating a Schedule C
business that generated losses year after year. Petitioner
admitted as much at trial. Accordingly, we sustain respondent's
disallowance of petitioner's claimed returns and allowances on
Schedule C of his 1993 return in the amount of $45,243.
Petitioner's 1993 Schedule C reflects that petitioner
operated a business of filament tape manufacturer and converter
as a proprietor. The Schedule C shows gross receipts of $6,417,
returns and allowances of $45,243, and cost of goods sold of
$6,031. Respondent disallowed the returns and allowances, but
made no adjustment to cost of goods sold.
In computing petitioner's total earnings from self-
employment, respondent erroneously added the $6,031 cost of goods
sold to the gross receipts of $6,417, rather than reducing the
latter by the former, thus erroneously arriving at total earnings
from self-employment in the amount of $12,448. Based on this
figure, respondent incorrectly computed petitioner's self-
employment tax liability and the related self-employment tax
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