- 3 -
Gross receipts $26,864
Less cost of goods sold 13,569
Gross income 13,295
Less expenses:
Car & truck $531
Insurance 2,298
Legal 2,000
Utilities 1,764
Casual labor 1,200
Permits 185 7,978
Net profit $5,317
Upon examination respondent disallowed the deductions for legal,
utilities, and casual labor expenses and reduced the insurance
expense by $1,687. Respondent also reduced the amount of cost of
goods sold by $8,000. In addition, respondent made certain
mathematical adjustments that flow from the changes in
petitioners’ adjusted gross income and are not in dispute.
Petitioners concede the adjustments for legal and utilities
expenses.
Petitioner kept no journal or other books and records. He
did maintain a checking account, but the canceled checks were
kept by his accountant who had moved to Florida and were
unavailable. Petitioner did not issue any Forms 1099 or Forms W-
2, Wage and Tax Statement, with regard to the deductions claimed
for casual labor. While petitioner could have obtained records
of his payments for insurance, he did not.
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Last modified: May 25, 2011