Jerry J. and Susan N. LeBouef - Page 6




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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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