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loss, $1,500 of moving expense, and $22,032 of Schedule C items.
Respondent allowed petitioner a deduction of $9,646 for employee
business expenses instead of the $6,250 claimed.
We found on our own examination of the return and the notice
of deficiency that respondent erred in disallowing the deduction
of $22,032 of Schedule C items rather than disallowing the
$9,512.50 business loss deducted by petitioner on his 1996
return. The $22,032 amount appears to be comprised of $7,220 of
cost of goods sold, $12,212 (rounded off) of business expenses,
and $2,700 of home office expense, less $100 of gross receipts.
On the Schedule C, petitioner listed $100 of gross receipts.
Petitioner also listed $7,220 of cost of goods sold, but because
he failed to carry the resulting $7,120 ($7,220 less $100)
forward as negative gross income, he did not deduct the $7,120 as
a loss. The $2,700 of home office expense was not added to the
tentative loss, and therefore was not deducted as a loss.
Instead, petitioner incorrectly subtracted the $2,700 from the
$12,212.50 of tentative loss shown on the return, rather than
adding the expense to the tentative loss. This resulted in the
$9,512.50 amount which petitioner deducted as a business loss on
line 12 of the 1996 Form 1040, U.S. Individual Income Tax Return.
Respondent should have disallowed this $9,512.50 amount, the
entire claimed Schedule C loss, instead of the $22,032 amount
which respondent erroneously disallowed. Thus, respondent erred
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