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two check". Petitioners paid total annual mortgage payments for
their home in 1994 and 1995 in the amount of $18,000. In
addition to the rental of the home, petitioner testified that she
also charged OMNIX a $200 monthly rental fee for the use of the
household car. Petitioners included the $18,000 rent for use of
the home and the $2,400 rent for use of the household car as
income on their Schedule E for the years in issue.
Petitioner provided no written records or other
substantiation for the rental income and rental expenses claimed
on Schedule E as required under section 6001. It is evident from
petitioner's testimony that the rental transactions did not
actually take place, but were "paper entries" for what petitioner
felt were "fair rental values" for the use of her car and home by
OMNIX. Petitioner has provided no records or credible testimony
to show that the transactions took place or that the expenses
were incurred. Accordingly, we conclude that petitioners did not
have rental income from OMNIX as reported on Schedules E during
1994 and 1995, nor did they incur rental expenses relating to
OMNIX, deductible on Schedules E. Respondent is sustained on
this issue.
3. Schedule E - S Corporation Losses
Petitioner testified that OMNIX received $11,000 and $9,000
in income during 1994 and 1995. Petitioner asserts that the
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