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Respondent determined a deficiency of $10,973 in
petitioners' Federal income tax for 1997 and an accuracy-related
penalty under section 6662(a) of $2,194.60.
The issues for decision are: (1) Whether petitioners are
entitled to reduce gross receipts by a cost of goods sold of
$38,897 in connection with a trade or business activity of Steven
M. Arhontes (petitioner) known as Spanky's Sports Cards
(Spanky's); (2) whether petitioners are entitled to a deduction
for car and truck expenses of $275 in connection with Spanky's;
(3) whether petitioners are entitled to a $22 depreciation
deduction in connection with Spanky's; and (4) whether
petitioners are liable for the accuracy-related penalty under
section 6662(a) for negligence or disregard of rules or
regulations in the amount of $2,194.60. The remaining
adjustments in the notice of deficiency to petitioners' itemized
deductions, self-employment taxes, and self-employment tax
deduction are computational and will be resolved by the Court's
holdings on the aforementioned issues.
Some of the facts were stipulated, and those facts, with the
annexed exhibits, are so found and are incorporated herein by
reference. At the time the petition was filed, petitioners’
legal residence was Castro Valley, California.
During the year at issue, petitioners were both employed by
Bay Area Rapid Transit (BART) at San Francisco, California;
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