- 4 -
1992 1993 1994
Insurance expense -0- $7,820 $8,763
Interest income $228 524 -0-
Misc/other expense 2,624 2,704 3,444
Net operating loss deduction 25,800 18,775 28,789
Reclassification items (4,553) (17,062) (9,588)
Sale of oil royalties -0- 3,048 -0-
Taxes/licenses expense 2,228 (1,299) 3,463
Travel expense 3,875 9,764 3,625
Truck expense 6,960 -0- -0-
Utilities/phone expense 4,778 4,587 5,012
Self-employment tax deduction (4,641) (223) (4,865)
Capital gains and losses -0- 2,460 (3,000)
Taxable Social Security -0- 826 4,730
Deduction for exemptions 2,208 -0- -0-
Total adjustments 226,541 64,931 114,596
Taxable income on return1 (18,756) (39,689) (44,427)
Taxable income as adjusted 207,785 25,242 70,169
1 The taxable income amounts are those which the notice of
deficiency indicates were on the original returns filed by
petitioners.
These adjustments resulted in the determination that petitioners
were liable for the following deficiencies, section 6662(a)
accuracy-related penalties, and section 6651(a)(1) additions to
tax in the total amount of $114,514:
1992 1993 1994
Deficiencies $66,446 $4,231 $24,438
Penalties 13,289 -0- 4,888
Additions to tax -0- -0- 1,222
Total 79,735 4,231 30,548
Petitioners filed a petition with the Court on June 10,
1998, seeking a redetermination of the deficiencies stated in the
notice. Respondent filed an answer on July 9, 1998. In the
answer, respondent took the same position as reflected in the
notice of deficiency. Petitioners’ counsel first met with a
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