- 5 -
cost of goods sold reflected the industry average for stale and
damaged returns, and not the actual amount returned to IBC.
Petitioners also claimed Schedule C deductions for home office
expenses in the respective amounts of $7,919 and $9,433 for 1996
and 1997. Petitioner claimed the following deductions related to
his vehicles on Schedule C:
Claimed Deduction 1996 1997
Car & truck expenses $2,480 $2,559
Taxes & licenses —-- 2,152
Interest (other) 2,479 1,215
Depreciation 2,952 3,621
Sec. 179 expenses —-- 10,000
On his Federal income tax returns, petitioner attributed a
business use for the vehicles of 71.12 percent for 1996 and 63.74
percent for 1997.
Respondent determined that petitioner was a common-law
employee and, therefore, not permitted to report income and
expenses on Schedule C. Respondent also determined that
petitioner is not entitled to any reduction for cost of goods
sold because petitioner was not in the business of selling baked
goods and, in any event, petitioner failed to substantiate any
purchases. Respondent also contends that since petitioner was an
employee, petitioners do not qualify for the home office
deductions, as the home office was not maintained for the
convenience of the employer. Respondent disallowed all of the
Schedule C deductions because the expenses were not ordinary and
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011