Evelyn J. Glenn - Page 10




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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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