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Notice of Deficiency
On August 21, 1995, prior to the date on which petitioners
submitted their 1993 amended return to the IRS, respondent issued
a notice of deficiency (notice) to petitioners for their taxable
year 1993. Respondent determined in the notice that petitioners
are entitled to an amount of Schedule C expenses that equals the
amount of gross receipts (i.e., $2,100) that petitioners reported
in that schedule and that they are not entitled to the balance of
those expenses (i.e., $21,258). The bases for respondent's
determination in the notice with respect to the expenses peti-
tioners claimed in their 1993 Schedule C were that (1) peti-
tioners have not shown that those expenses were paid or incurred
during 1993, (2) petitioners have not demonstrated that those
expenses are ordinary and necessary to petitioner's automobile
repair activity during that year, and (3) petitioner was not
engaged during 1993 in his automobile repair activity for profit.
Respondent further determined in the notice that petitioners
are not entitled to the $3,000 capital loss attributable to the
sale of petitioner's Ferrari that petitioners claimed in their
1993 Schedule D.
In addition, respondent determined in the notice that
petitioners are not entitled to the $11,371 casualty loss deduc-
tion that petitioners claimed in their 1993 Schedule A.
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