- 5 -
Office expenses 50 50
Utilities 500 500
16,628 12,900
Home office2 1,002 882
Total 17,630 13,782
1 The 1993 amount of $15,648 consists of a $585 patent fee,
$10,000 for the valve prototype, and $4,938 for a lathe,
computer, and tools. The 1994 amount of $12,000 consists of
$2,000 for an IBM PS1 and $10,000 for a second prototype. The
record contains no evidence as to the basis for the prototype
costs.
2 Amounts shown are rounded to the nearest dollar. The
computations for the home office deductions included amounts for
insurance and utilities.
For the home office expenses, the following documents were
stipulated: A Notice of Assessed Value Change for petitioner’s
residence dated February 11, 1989; an annual real estate tax and
interest statement for 1993; an amended declaration page for a
homeowner’s insurance policy; one page of a telephone bill from
1993; one gas bill; and one electric bill.
Petitioner did not file a Schedule C with his 1995 joint
return. Petitioner testified that he filed tax returns for CCSI
in 1994, 1995, and 1996. He claimed expenses on CCSI’s return
only when CCSI reported income. CCSI reported income when
petitioner did contract work on behalf of CCSI.4
Petitioner presented a brochure reflecting an undated
business plan statement describing the sprinkler system. In this
4 Petitioner did not elaborate on what type of contract
work he was doing on behalf of CCSI, but we assume that it was
unrelated to the sprinkler system.
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Last modified: May 25, 2011