John Shackelford Fairbanks - Page 2

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               The issues for decision are:  (1) Whether petitioner was               
          engaged in the trade or business of consulting in 1995, and, if             
          so, whether petitioner is entitled to claim Schedule C expenses             
          relating to the consulting activity for the 1995 tax year; and              
          (2) whether petitioner is liable for an accuracy-related penalty            
          pursuant to section 6662(a).                                                
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and the exhibits submitted at trial are            
          incorporated herein by this reference. At the time the petition             
          was filed, petitioner resided in San Diego, California.                     
               In 1991, petitioner began working as an engineer for Silicon           
          Systems (Silicon) in Orange County, California, and he was laid             
          off from Silicon in 1992.  Thereafter, in the same year,                    
          petitioner established Fairbanks Laboratories (Fairbanks) as a              
          sole proprietorship to provide state-of-the-art consulting                  
          services to the communications industry.  In connection                     
          therewith, petitioner eventually installed several computers and            
          communication lines in his home.                                            
               Petitioner’s first consulting contract in 1992 was with                
          Silicon, his former employer, in connection with the relocation             
          of its manufacturing facility.  Petitioner earned $17,431 in 1992           
          from his consulting activity and reported gross receipts of                 
          $17,431 and net profit of $5,630 on Schedule C attached to his              
          1992 Federal income tax return.                                             

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