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Gross receipts or sales $100,000
Returns and allowances –-
Cost of good sold 62,000
Gross income 38,000
Expenses
Advertising $500
Bad debts 3,000
Insurance 1,300
Mortgage interest 2,500
Legal and professional 2,000
Repairs and maintenance 10,000
Supplies 7,000
Taxes and licenses 550
Travel 5,300
Meals and entertainment 1,600
Utilities 1,000
34,750
Net profit 3,250
In the subject notice of deficiency, respondent
determined that the cost of goods sold for petitioner’s
newsstand business was $11,809, and that petitioners had
overstated the cost of goods sold claimed on their 1993
return by $50,191 (i.e., $62,000 minus $11,809).
Respondent also disallowed the expenses claimed on
petitioners’ Schedule C in the aggregate amount of $34,750
for lack of substantiation. Respondent determined that
petitioners’ self-employment tax liability is increased and
that petitioners are allowed an additional self-employment
tax deduction of $4,522 due to the increase in their self-
employment tax liability.
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Last modified: May 25, 2011