- 4 -
While petitioner sometimes went to Lee’s office to view the
computer chips that Lee had purchased, petitioner never took
possession of the chips, did not maintain any inventory or supply
of computer chips, did not know the sales price of the computer
chips, and did not maintain any records relating to the purchase
or sale of the computer chips. The only records petitioner
maintained were of the amount of funds that he advanced to Lee
and the amount of the return that Lee owed him on those advances.
During 1991, petitioner received a return on his advances
and commissions from Lee in the amount of $799,550. During 1992,
petitioner received a return on his advances from Lee in the
amount of $340,152. As of December 31, 1991, Lee owed petitioner
expected returns of $250,000 on funds that petitioner had
advanced to him. Likewise, as of December 31, 1992, Lee owed
petitioner expected returns of $140,000 on funds that petitioner
had advanced to him.
For the 1991 tax year, petitioners reported $799,550 as
gross receipts and $250,000 as costs of goods sold on the
Schedule C attached to their tax return. For the 1992 tax year,
petitioners reported $340,152 as gross receipts and $140,000 as
costs of goods sold on the Schedule C attached to their return.
The gross receipts figures shown on petitioners’ 1991 and 1992
Schedules C do not reflect the sales of the computer chips by Lee
to third parties. Rather, the gross receipts represent
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011