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H. Respondent’s Audit and Determination
Respondent’s tax auditor, Shirley Todd (Todd), audited
petitioner’s 1994 and 1995 income tax returns. Petitioner gave
Todd his Colonial Bank statements for January to November 1995.
He did not produce any other bank statements. Petitioner did not
give complete records of his income and deductions for 1994 and
1995 to Todd. Petitioner told Todd that he employed only one
individual in his tax preparation activity and that the
individual was an independent contractor.
Petitioner deducted as rent on his 1994 and 1995 Schedules C
mortgage payments he made for the Lower Wetumpka Road house.
Petitioner told Todd that he received no gifts or
inheritances in 1994 and 1995. He also said that he calculated
gross receipts for his tax return activity based on deposits into
his Colonial Bank account.
Respondent determined petitioner’s gross receipts from the
tax preparation business from deposits into petitioner’s Colonial
Bank account. Respondent averaged petitioner’s deposits for
September, October, and November 1995 to estimate an amount for
December because petitioner did not give respondent his December
1995 bank statement.
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