Ruth N. Nelson - Page 12




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               On her 1993 Federal income tax return, petitioner reported             
          $38,029 in wage income from SOI, $2,225 in taxable interest                 
          income, and a $729 taxable State income tax refund.  Petitioner             
          also reported a $3,000 capital loss carryover, a $1,817 loss from           
          rental real estate, and a $17,069 Schedule C loss from the                  
          operation of BRVC.  Thus, petitioner reported total income and              
          adjusted gross income of $19,097 for 1993.  On Schedule C,                  
          petitioner reported $2,598 in gross receipts and total expenses             
          of $19,667, resulting in the reported $17,069 Schedule C loss.              
               In the notice of deficiency, respondent made the following             
          adjustments to income for the years at issue:                               

               Adjustment                    1992           1993                      
               Hobby income                  ---            $ 2,598                   
               Itemized deductions           $ 4,329        (914)                     
               Prior year refund             –--            1,227                     
               Schedule C profit/loss        20,106         17,069                    
               Standard deduction            (3,600)        –--                       
               Total                         $20,835        $19,980                   

          These adjustments resulted in deficiencies of $5,838 and $4,349,            
          respectively, for 1992 and 1993.  Respondent also determined that           
          petitioner was liable for the accuracy-related penalty under                
          section 6662(a) for negligence or disregard of rules or                     
          regulations of $1,167.60 for 1992 and $869.80 for 1993.                     









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