- 3 -
1995 1996
Gross Income $10,530 $11,580
Less:
Insurance $2,320 $2,520
Interest 6,311 5,893
Legal expenses 130 140
Office expenses 291 -0-
Repairs 6,450 230
Supplies 16,310 -0-
Taxes & licenses 470 -0-
Utilities 2,802 -0-
Car & Truck -0- 4,464
Wages -0- 568
Other expenses -0- 122,494
Total expenses 35,084 36,309
Loss $24,554 $24,729
1Other expenses consisted of cleaning supplies ($147), tags
and licenses ($360), auto parts ($3,657), State inspection
($150), car purchases ($15,420), rental uniforms ($780), and
office and car phone ($1,980).
Mayo’s Auto Sales began operations in 1989 or 1990, and has
never operated at a profit. For the taxable years 1993 and 1994,
petitioners reported losses of $14,225 and $16,021, respectively,
from this activity. The records of the Virginia Department of
Motor Vehicles show that petitioners sold four automobiles during
the period of January 1, 1995 through December 31, 1996. Two of
those vehicles were sold to petitioners’ relatives.
Upon examination of both years respondent disallowed the
deductions claimed on Schedule C with respect to Mayo’s Auto
Sales on the ground that the activity was not engaged in for
profit. With respect to Schedule A, Itemized Deductions,
deductions for 1995, respondent disallowed $2,663 of the $6,764
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Last modified: May 25, 2011