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commencing after July 22, 1998. Internal Revenue Service
Restructuring & Reform Act of 1998, Pub. L. 105-206, sec.
3001(c), 112 Stat. 685, 727. Since the record here indicates
that the examination in this case was ongoing by at least April
of 1998, the burden remains on petitioners to establish that
respondent’s determinations are erroneous.
III. Schedule C Reporting
A. General Rules
As a basic premise, the income of a sole proprietorship must
be included in calculating the income and tax liabilities of the
individual owning the business. Sec. 61(a)(2). The net profit
or loss of such an enterprise is generally computed on Schedule C
by subtracting cost of goods sold and ordinary and necessary
business expenses from the gross receipts of the venture.
In this connection, taxpayers are required to maintain
records sufficient to establish the existence and amount of all
items reported on the tax return, including both income and
offsets or deductions therefrom. Sec. 6001; Hradesky v.
Commissioner, 65 T.C. 87, 89-90 (1975), affd. 540 F.2d 821 (5th
Cir. 1976); sec. 1.6001-1(a), Income Tax Regs. Additionally,
statements made on a tax return signed by the taxpayer have long
been considered admissions, and such admissions are binding on
the taxpayer absent cogent evidence indicating they are wrong.
Waring v. Commissioner, 412 F.2d 800, 801 (3d Cir. 1969), affg.
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