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month from her brother in 1996 for this purpose.
Petitioners timely filed a Federal income tax return, Form
1040, for 1996. Petitioners attached to their return Schedule C,
Profit or Loss From Business, relating to Mr. Sasser’s business.
On his Schedule C, Mr. Sasser reported gross receipts in the
total amount of $5,635. This amount corresponds with the amount
of nonemployee compensation reported on a Form 1099-MISC that
Evans City issued to Mr. Sasser. Insofar as his arrangement with
Mr. Roach was concerned, Mr. Sasser did not claim any reduction
in gross receipts for cost of labor, nor did he claim any
deduction for subcontract labor.
In the notice of deficiency, respondent determined that
petitioners failed to report $8,352 of nonemployee compensation.
Respondent’s determination is based on a Form 1099-MISC filed by
Mr. Roach claiming that he paid $8,352 to Mr. Sasser in 1996.
Respondent sought to confirm this specific item adjustment by a
bank deposits analysis that demonstrated, in respondent’s view,
that Mr. Sasser had between $6,730 and $11,829 of unreported
income in 1996.
Discussion
At trial, respondent called Mr. Roach as a witness and
introduced Mr. Roach’s “daily planner” as an exhibit. In
respondent’s view, Mr. Roach’s testimony and records corroborate
the Form 1099-MISC showing the payment of $8,352 of nonemployee
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