- 3 -
For the year 1992, a portion of petitioner's income from his
activities was paid to him as a salary. That amount, $55,053,
was reflected by a Form W-2, and petitioners reported that amount
as salary and wage income on page 1 of their Federal income tax
return. Another portion of petitioner's business was considered
as a self-employed trade or business activity, and, to reflect
that activity, petitioners reported their income and expenses on
a Schedule C of their return. For 1992, petitioners reported
gross receipts from this activity of $13,889, expenses of
$35,878, and a net loss of $21,989.
With respect to the self-employed activity, respondent, in
the notice of deficiency, allowed $10,350 of the claimed expenses
and disallowed $25,528 of the claimed expenses. The disallowed
expenses have been classified into three groups and consist of
the following:
(1) Expenses relating to a Mercedes automobile:3
Car expenses $1,991
Depreciation 2,550
Insurance 2,362
Repairs 3,322 $10,225
(2) Airplane rental, including rent,
piloting, and fuel expenses 9,826
3 With respect to the Mercedes automobile, petitioners
elected to claim deductions for the actual expenses incurred in
operating the vehicle in lieu of the standard mileage rate of 28
cents per mile allowable for 1992 under Rev. Proc. 92-104, 1992-2
C.B. 583.
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