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Friscia Construction reported gross receipts for the 1995
taxable year of $262,211, which respondent has not challenged.
However, this figure included Amway sales of $1,290, which we
previously allocated to Michelle Friscia’s Amway distributorship
for the Friscias’ 1994 taxable year. Accordingly, we find Friscia
Construction’s gross receipts for the 1995 taxable year to be
$260,921.
Taking the above into account, Friscia Construction had a net
profit of $31,125 ($260,921 - $229,796) for the 1995 taxable year,
representing a profit margin of 11.9 percent. Respondent conceded
on brief that Friscia Construction’s profit margin was between 8
and 12 percent. Our determination is in the high range of
respondent’s concession, but the record does not support a lower
margin.
Friscia Construction reported a loss for the 1995 taxable
year of $611. Accordingly, we hold that Friscia Construction
underreported its income by $31,736.
Issue 7. Friscia Construction’s Negligence Accuracy-Related
Penalty
Respondent determined a negligence accuracy-related penalty
under section 6662(a) for Friscia Construction’s 1995 taxable
year. The record does not show that the company was not negligent
or the existence of reasonable cause. Though Fricia
Construction’s return was prepared by an accountant, there was no
testimony at trial that the company relied upon its accountant’s
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