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Form 1120S - Income Tax Return for an S Corporation
1994 1995
Gross receipts $11,000 $9,000
Deductions:
Rent $20,400 $20,400
Tax/licenses 155 649
Advertising 977 989
Professional dues &
subscriptions 2,037 3,683
Photocopying & postage 10,685 205
Books & supplies 3,694 174
Transportation 1,218 1,200
Legal costs & consulting 1,747 1,093
Total 40,913 28,393
Net loss (29,913) (19,393)
In the notice of deficiency, respondent disallowed all items
of expense relating to the rental activity. Respondent also
reduced petitioners' income by the $20,400 of reported rental
income for each year in issue. Respondent allowed petitioners'
home mortgage interest and tax deductions as itemized deductions
on Schedule A for each year in the identical amounts as claimed
and disallowed on Schedule E. In addition, respondent disallowed
the losses claimed on Schedules E in the amounts of $29,913 and
$19,393 for 1994 and 1995, respectively. These losses are S
corporation losses reported to petitioners on Schedules K-1 from
OMNIX.
Discussion
1. General
We begin by noting that the Commissioner's determinations
are presumed correct. See Rule 142(a); Welch v. Helvering, 290
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