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another document called a "bid", whereby petitioner estimated
that the storm damage would cost $64,900 to repair. Petitioner
has no workups either of the original cost of constructing the
house or of the estimated repair expenses. Petitioner did not
have any documentation for the subcontracting work. According to
petitioner, he estimated the following expenses: Materials
($120,000), employee wages ($50,000), and travel, meals, and
lodging ($10,000). Petitioner is not licensed as a contractor,
plumber, or electrician.
It is unclear when the house was completed or, if in fact
the property had been conveyed to him, when petitioner reconveyed
the property to his mother. Petitioner testified that over the
years 1994 to 1997 his mother paid him $200,000, but he did not
know how much or when the payments were made. Petitioners did
not report any of these payments on their Federal income tax
returns for the years in issue. On January 5, 1998, petitioner
filed a mechanic's lien against the property in the amount of
$64,900.
Petitioner allegedly drove from his home to Detroit Lakes
each week. On Schedules C filed with the 1995 and 1996 returns,
petitioners reported no income and claimed the following
expenses:
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