- 4 -
1994,2 by $25,000. He did so to increase petitioners’ income for
Social Security purposes.
Petitioners understated gross receipts on their Schedule C
by $139,993, and purchases by $101,763. Petitioners overstated
their fuel tax credit by $8,884 for 1994.
OPINION
A. Whether Respondent Properly Disallowed Petitioners’
Deduction of $63,630 of Repairs Expenses for 1994
The first issue for decision is whether petitioners may
deduct more than $51,203 for repairs expenses for 1994.
Petitioners contend that they may deduct $114,823 for repairs
expenses for 1994. Petitioners did not report income until they
received it, but they deducted some expenses before they paid
them. Petitioners contend that this is a proper hybrid method of
accounting which they have consistently and properly used to
compute and report petitioner’s income and expenses from his
logging business. Petitioners also contend that respondent’s
determination was an abuse of discretion because the cash method
of accounting does not clearly reflect petitioner’s income from
the logging business.
We disagree. First, petitioners did not explain why the
cash method would not clearly reflect their income. Second,
petitioners did not use a valid hybrid method of accounting.
2 Petitioner incurred only $114,823 of repair expenses in
1994.
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