Marie Key and David Glen Key - Page 13




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          expenses for 1995 therefore total $17,340.  Petitioners’ total              
          yearly expenses for 1995 equal $48,382.44.                                  
               Respondent then added in petitioners’ “one time” personal              
          expenditures (i.e., the rent deposit, the Mercedes purchase, the            
          Astro Minivan payment, the appliance purchases, and the Acura               
          purchase).  These expenses total $53,476.04.  Thus, petitioners’            
          total personal expenditures for 1995 equal $101,858.48.                     
               Next, respondent added the cash ($302,515.25), money orders            
          ($15,750), and cashier's checks ($105,175) seized from Mr. Key in           
          November 1995.  This amount totals $423,440.25.  Responded added            
          this amount to petitioners’ total personal expenditures for 1995            
          ($101,858.48) bringing the final total to $525,298.73.                      
               Subtracting petitioners’ reported adjusted gross income                
          ($341,184) from the amount calculated via the net worth method              
          results in unreported income of $184,114.73.  Based upon the                
          foregoing, we conclude that in 1995 petitioners had $184,114.73             
          of unreported income from The Ultimate Comeback.                            
          II. Self-Employment Tax                                                     
               Respondent argues that in 1995 petitioners had self-                   
          employment income based on petitioners’ reported and unreported             
          income from The Ultimate Comeback, and petitioners owe self-                
          employment tax based on that income.                                        
               Section 1401 imposes self-employment tax on self-employment            
          income.  Section 1402 defines net earnings from self-employment             
          as the gross income derived by an individual from the carrying on           




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