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was earning a salary in excess of $243,000 per year. Following
the termination of his employment, petitioner promptly began to
look for an income source to replace his lost income. He
ultimately decided to start a manufacturing consulting business,
KAB Consulting, and did so in 1994. On Schedule C of his 1994
Federal income tax return, petitioner deducted expenses allegedly
paid in connection with KAB Consulting.
Respondent audited petitioner’s 1994 return and, in a notice
of deficiency dated February 19, 1998, proposed adjustments
disallowing all of petitioner’s Schedule C deductions because
petitioner failed to substantiate them. During the trial in this
case, respondent modified his litigating position and conceded
that the following adjustments to petitioner’s Schedule C
deductions were appropriate:
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