- 23 -
ReimbursedSupplies
1990 Check Date Payee Amount Direct PaymentsPayments and Services
1758 2/20 State of Cal.$5.00 $5.00-0- -0-
1730 2/28 N.Y. State 470.29 470.29-0- -0-
1731 2/28 N.Y. State 114.70 114.70-0- -0-
1732 2/28 N.Y. State 2,850.382,850.38 -0- -0-
1738 3/7 IRS 791.12 791.12-0- -0-
1737 3/7 Mass. 2,350.002,350.00 -0- -0-
2269 3/9 Jeffrey Kolton12,500.0012,500.00 -0- -0-
124 7/10 N.Y. State 5,337.57 5,337.57-0- -0-
125 7/15 N.Y. State 1,128.131,128.13 -0- -0-
189 11/20 Said Dermarkar2,000.002,000.00 -0- -0-
209 12/10 IRS 235.08 235.08-0- -0-
217 12/21 N.Y. State 150.00 150.00-0- -0-
215 12/12 IRS 228.64 228.64-0- -0-
1878 1990 Carey Storm 930.00 930.00-0- -0-
242 12/31 Employment Dev. Dept.7,000.00 -0-$7,000.00 -0-
164 10/1 US Dept. of Treasury12,000.00-0- 12,000.00-0-
163 9/26 City of Beverly Hills2,679.75 -0-2,679.75 -0-
1799 5/12 Employment Dev. Dept.59.02 59.02-0- -0-
Wire 2/16 Shawmut Bros.30,010.0030,010.00 -0- -0-
2292 2/20 Stewart Gleischman18,500.0018,500.00 -0- -0-
Wire 11/28 Security–Los Angeles4,010.004,010.00 -0- -0-
Total 103,349.6881,669.93 21,679.75 -0-
Amount reported 97,854.00
on return
Difference 5,495.68
At the outset, we note that there is a fundamental
difference between expenditures that constitute "returns
and allowances" and expenditures that are treated as
business deductions under section 162. See Beatty v.
Commissioner, 106 T.C. 268, 273 (1996); Max Sobel
Wholesale Liquors v. Commissioner, 69 T.C. 477 (1977),
affd. 630 F.2d 670 (9th Cir. 1980); B.C. Cook & Sons, Inc.
v. Commissioner, 65 T.C. 422, 428 (1975), affd. per curiam
584 F.2d 53 (5th Cir. 1978); see also sec. 1.61-3(a),
Income Tax Regs. The former expenditures are taken into
account in computing the gross income from a business
activity. See B.C. Cook & Sons, Inc. v. Commissioner,
supra at 428. Strictly speaking, they are not deductions
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