- 10 -
Automobile Expenses
Petitioners maintain that they are entitled to deduct $1,581
in unreimbursed automobile expenses incurred during 1991 in
connection with Classic Pub's operation. These expenses were not
claimed on their tax return.
Notice of Deficiency
In the notice of deficiency mailed to petitioners regarding
their 1991, 1992, and 1993 tax years, respondent revised
petitioners' allowable losses and income from Classic Pub, as
described above. Respondent also determined a section 6662(a)
accuracy-related penalty for each of the years in issue.
OPINION
Issue 1. Determination of Classic Pub's Gross Sales
The primary issue before us is whether petitioners had
unreported income arising from Classic Pub during the years in
issue. In resolving this issue, we must determine whether Revenue
Agent Bixler's use of the percentage markup method in
reconstructing Classic Pub's gross sales was proper and whether
discounts4 he applied in computing the amount of sales of
discounted mixed drinks, wine, and beer were correct.
4 A higher discount percentage for items sold at
discounted prices benefits petitioners because it results in
lower total gross sales.
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Last modified: May 25, 2011