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maintain accurate books and records with respect to his claimed
meals and entertainment expenses that would satisfy the
substantiation requirements of section 274(d). See sec. 6001;
sec. 1.6001-1(a), Income Tax Regs. There is no evidence in the
record that petitioner relied on the advice of a professional,
such as an accountant. Petitioner's obvious position, to be
surmised from the totality of his testimony, is that he relied on
two previous audits by the IRS in which the manner of reporting
his process-server income was accepted. As noted earlier, no
documentary evidence was presented to show the basis upon which
these audits were settled. In the second audit, petitioner paid
a deficiency of $1,500 that may or may not have been based on the
method of reporting his process-server income. Finally,
petitioner was certainly on notice each year when he received IRS
Forms W-2 from the Messenger Service that clearly identified his
earnings as salary or wages. Salary or wages do not constitute
self-employment income, nor is such income gross income from a
trade or business activity for purposes of Schedule C. The Court
sustains respondent on this issue.
An appropriate order and
decision will be entered.
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Last modified: May 25, 2011