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For 1993, 1994, and 1995, IRS Publication 1136, Statistics
of Income Bulletin, reflected the following average net profit
margins for roofing contractors:
Average
Net Profit
Year Margins
1993 20%
1994 25%
1995 18%
As indicated, respondent’s tax deficiencies determined
against petitioners are based on deposits to the checking account
with no allowance for labor and material costs which obviously
were incurred in the roofing business. We conclude that for each
year it is appropriate to apply to the checking account deposits
that are specifically identifiable as gross receipts of the
roofing business (namely, those deposits that represent the
checks received from Roof Technologies and Vaughn Roofing) the
average net profit margin established by respondent for roofing
contractors and to allow estimated business expense deductions
for the business expenses so calculated.
Petitioners have presented no evidence as to how the income
from the roofing business should be divided between them and
Delwin Houser.
At trial, Rebecca Adair was asked several times her opinion
on how income relating to the roofing business and to the
checking account deposits should be divided between herself, her
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