- 7 -
Cost of Goods Sold
ClaimedAllowedDis- ClaimedAllowedDis- ClaimedAllowedDis-
allowed allowed allowed
36,092 34,4401,652 35,00034,747 253 19,2989,732 9,566
Respondent disallowed deductions in the amounts shown above
because Mr. Ngo failed to maintain adequate records to
substantiate the claimed deductions. However, respondent allowed
Mr. Ngo adjusted deductions for 1995, 1996, and 1997, of $1,794,
$3,533, and $2,782, respectively, for one-half of the self-
employment tax due.
Respondent further determined that Mr. Ngo had unreported
gross income for the years in issue. Because the business ledger
reflected no recorded income for some months, respondent
calculated that the omitted income was at least equal to the
expenses for those months. Using the bank deposits method,
respondent determined that Mr. Ngo failed to report gross income
of $7,275, $21,421, and $5,409, for 1995, 1996, and 1997,
respectively. Finally, respondent determined that Mr. Ngo was
not entitled to earned income credits during the years at issue,
and his filing status was married filing separate, not head of
household.
In the notice of deficiency issued to Ms. Kang, respondent
determined that she was not entitled to earned income credits
during the years at issue, and her filing status was married
filing separate, not head of household.
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Last modified: May 25, 2011