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return on July 28, 1998, after the effective date of section
7491. Therefore, the burden-shifting rule of section
7491(a)(1) may apply to that year. However, as will be
discussed below, the limitations on the burden-shifting rule
that are set forth in section 7491(a)(2)(A) and (B) serve to
preclude the applicability of that rule to the factual issues
in this case involving the NOL and Schedule C deductions.2
A. Schedule C Gross Income
The record demonstrates that petitioner received
unreported gross income in 1995 in the amount of $29,606,
determined as follows:
Gross receipts
Dr. Jacobs
Services rendered $54,500
Reimbursement 61,004 $115,504
Dr. Socha 8,166
Total gross receipts 123,670
Less: cost of goods sold -61,004
Gross profit/gross income 62,666
Less: reported gross profit/gross income -33,060
Unreported gross profit/gross income 29,606
In contrast, the record demonstrates that petitioner did
not receive unreported gross income in 1996, but rather
overreported her gross income for that year, determined as
follows:
2 We decide the issue involving Schedule C gross income
without regard to the burden of proof.
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