Julie Pusateri - Page 7

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          to hide this by specious deductions on her Schedule C-1.  On this           
          record, we are satisfied that petitioner reported all of her                
          income, subject to correction for the $258 mistake in her favor.            
          Accordingly, we sustain petitioner on this issue.                           
               Petitioner's self-employment tax was increased by                      
          respondent.  A taxpayer is liable for self-employment tax on net            
          earnings pursuant to section 1401.  Net earnings are defined as             
          "the gross income derived by an individual from any trade or                
          business carried on by such individual," less the allowable                 
          deductions pertaining to such trade or business.  Sec. 1402(a).             
          It is not disputed that petitioner is self-employed in both her             
          businesses.  Accordingly, petitioner is liable for self-                    
          employment taxes to the extent that petitioner has net earnings             
          under our findings.  The deduction of one-half of the self-                 
          employment tax will be a computational adjustment.  Sec. 164(f).            
               The parties stipulated that the gross receipts in the Union            
          Bank account were $29,056, which was $258 less than the gross               
          receipts of $29,314 reported on the Schedule C-1.  We conclude              
          that the gross receipts for the Schedule C-1 business were                  
          $29,056.  When we deduct the expenses stipulated as substantiated           
          by petitioner of $6,274, petitioner had net profit of $22,782 for           
          her Schedule C-1 paralegal business.  This is in sharp contrast             
          to the net profit of $12,201 petitioner reported on the original            
          Schedule C-1.                                                               

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