- 10 -
account in order to make payments at the closing of her house.
The $22,500 was then subtracted from the total checks disbursed
amount that was used to calculate petitioner's cash expenditures,
thereby not altering the amount of petitioner's unreported
income.5
Second, respondent allowed Schedule C deductions of $28,314
claimed by petitioner for business expenses in their entirety,
unlike Ms. Dickerson's report, which allowed only $10,830 of the
claimed Schedule C deductions. The allowance of the additional
Schedule C deductions of $17,484 first reduced respondent's
Schedule C net income adjustment from $44,471 to $26,987, the
amount of petitioner's unreported Schedule C gross income. The
allowance of the remaining Schedule C deductions also led
respondent to add $25,3146 of paid business expenses to
petitioner's cash expenditures for purposes of computing her
unreported income, thereby increasing her unreported income in a
corresponding amount.7
5 Respondent's subtraction of $22,500 of bank deposits led
to a corresponding $22,500 increase in cash expenditures insofar
as the amount of total checks disbursed was reduced by $22,500
and petitioner's cash expenditures were calculated by subtracting
the amount of total checks disbursed from total expenditures.
6 The Schedule C included a $3,000 depreciation deduction, a
noncash expenditure, which explains why only $25,314 of the
$28,314 was included in petitioner's cash expenditures.
7 The following is an abbreviated explanation of how
respondent's determination of petitioner's unreported income was
revised from the amount contained in the statutory notice.
(continued...)
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