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For the years 1989 through 1997, “cost of goods sold” shown
on petitioner’s Schedule C consisted entirely of labor. Since
petitioner’s gross receipts reported on Schedule C for the years
in issue consisted entirely of prize money, the characterization
of labor as cost of goods sold is questionable.
In 1996, petitioner reported $3,105 in gross receipts and
cost of goods sold of $18,877. The entire $18,877 in reported
cost of goods sold consisted of reported labor cost. The $18,877
in reported labor cost represented a 38.5-percent increase over
reported labor cost in 1995, while reported gross receipts
dropped 14.34 percent. Of the $18,877 in reported labor cost,
$12,980 consisted of wages paid to Alan Dahart. Mr. Dahart is a
personal friend who lives with petitioner.
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