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letter requesting confirmation of the vendor’s transactions
with petitioner. The agent received 60 responses from the
vendors, each of which stated that the vendor did not have
any knowledge of Michael Vetrano.
Respondent’s agent treated the unreported income
summarized above as gross income from petitioner’s
automobile parts business. In the absence of any records
regarding petitioner’s cost of goods, respondent’s agent
allowed petitioner a cost of goods equal to 58.3 percent
of gross receipts. This amount is based upon industry
standards for a used automobile parts business.
Respondent’s agent also allowed certain other expenses that
petitioner substantiated during the audit and applied the
self-employment tax to the net income from the business.
The adjustments and the self-employment tax determined in
the subject notices of deficiency are as follows:
Adjustments to Income 1991 1992 1993
Used auto parts gross receipts$95,705 $95,613 $248,338
Used auto parts cost of sales -55,796 -55,742 -144,781
Used auto parts other expenses-10,671 -9,294 -7,382
Self-employment tax deduction -2,066 -1,892 -3,991
Total adjustments 27,172 28,685 92,184
Self-employment tax 4,131 3,783 7,982
After the respondent’s agent began auditing
petitioners, Mr. Vetrano transferred title to the couple’s
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