- 7 -
T.C. Memo. 1968-126; Lare v. Commissioner, 62 T.C. 739, 750
(1974), affd. without published opinion 521 F.2d 1399 (3d Cir.
1975); Kaltreider v. Commissioner, 28 T.C. 121, 125-126 (1957),
affd. 255 F.2d 833 (3d Cir. 1958); Smith v. Commissioner, T.C.
Memo. 1997-109, affd. without published opinion 129 F.3d 1260
(4th Cir. 1997); Rankin v. Commissioner, T.C. Memo. 1996-350,
affd. 138 F.3d 1286 (9th Cir. 1998); Sirrine Bldg. No. 1 v.
Commissioner, T.C. Memo. 1995-185, affd. without published
opinion 117 F.3d 1417 (5th Cir. 1997).
B. Contentions of the Parties
Throughout this litigation and the earlier examination of
their return, petitioners have maintained that the sole
proprietorship, LeBouef Company, was inactive during the taxable
year 1993 and neither earned any income nor incurred any costs of
goods sold. Rather, petitioners contend that the gross receipts
reflected on their Schedule C were in fact income of LeBouef
Company, Inc., a corporate entity owned by Mr. LeBouef.
Petitioners explain that prior to 1987 Mr. LeBouef operated his
construction enterprise as a sole proprietorship and thereafter
incorporated the business as LeBouef Company, Inc. They allege,
however, that certain customers mistakenly continued to use the
sole proprietorship’s employer identification number when
reporting payments for work performed to the Internal Revenue
Service (IRS) on Forms 1099. Petitioners further assert that
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