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$1,750.58 per month for the remainder of the lease (August 1,
1994, to July 31, 1995) and about $156 per month for common area
maintenance. In 1992, petitioner paid rent of $54,716.24 for
1992, 1993, and 1994. Petitioner and his landlord began to
negotiate a new lease in 1994 and signed it in 1995.
Petitioners reported on their Schedule C, Profit or Loss
from Business, attached to their 1992 return that petitioner had
received $149,358 in gross receipts and paid expenses of
$156,203, which included $54,716 as rental expense and $262 for
rental expense of vehicles, machinery, and equipment.
Petitioners reported that they owed no income tax for 1992.
On April 15, 1996, petitioners mailed their 1992 income tax
return to the Internal Revenue Service Center in Covington,
Kentucky, which received it on April 18, 1996.
On July 23, 1998, respondent issued a notice of deficiency
which states that, of the $54,978 petitioners deducted for rental
expenses for 1992, petitioners may deduct $16,860 and may not
deduct $38,118. Respondent also determined that petitioners are
liable for the addition to tax for failure to timely file their
return under section 6651(a)(1).
On September 17, 1999, petitioner sent a one paragraph
letter to respondent’s counsel and attached the following chart
which petitioner had prepared:
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