Gilbert J. Arevalo - Page 3




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               Petitioner did not have a separate office to conduct his               
          consulting activity.  Rather, petitioner asserts that he met                
          clients at restaurants and that he used space in his home to                
          prepare client presentations and to perform administrative tasks.           
          Petitioner further contends that he rented space to store the               
          activity's records.  Petitioner failed to present the records at            
          trial.  Instead, petitioner testified that he has discarded the             
          activity's records.  Petitioner did not maintain a separate                 
          business telephone line or a separate business bank account.                
               On the Schedule C attached to his 1996 Federal income tax              
          return, petitioner listed his business activity as "Instructor".            
          For 1996, petitioner reported gross receipts for the consulting             
          activity in the amount of $1,563 and claimed the following                  
          deductions:                                                                 
                    Expenses                                                          
                    Advertising                        $650                           
                    Car & truck                        7,327                          
                    Depreciation                       6,201                          
                    Legal & prof. services             275                            
                    Office expense                     773                            
                    Repairs & maintenance              529                            
                    Supplies                           27                             
                    Travel                             1,511                          
                    50% meals & entertainment          2,101                          
                    Business gifts                     203                            
                    Cleaning                           138                            
                    Demos, training                    507                            
                    Dues, publications                 473                            
                    Educational supp.                  150                            
                    Field accommodations               175                            
                    Incentive/awards                   425                            
                    Postage                            102                            
                    Storage                            1,249                          





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