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income by comparing changes in their net worth from 1 year to the
next for the 3 years in issue. Respondent’s net worth analysis
is as follows:3
Net Worth Expenditures Computation
Assets 12/31/92 12/31/93 12/31/94 12/31/95
Cash on hand $2,500 $2,500 $2,500 $2,500
Cash in banks 220 2,639 7,277 21,877
Notes receivable – 115,000 111,359 107,357
Inventory 20,477 18,514 12,000 18,221
Investments 821,000 654,000 889,621 762,000
Net accounts receivable 9,000 171,000 105,200 99,000
Total assets 853,197 963,653 1,127,957 1,010,955
Liabilities & Accum Depr
Notes & loans payable $409,938 $406,899 $653,369 $402,947
Accumulated depreciation –- – 1,873 3,746
Total liabilities & 409,938 406,899 655,242 406,693
Accum depr
Net worth 443,259 556,754 472,715 604,262
Less beginning net worth 443,259 556,754 472,715
Increase in net worth 113,495 (84,039) 131,547
Add: Personal expenses 29,148 58,972 26,628
Adjustments (capital loss (1,800) –- –
not deducted)
Corrected adjusted gross
income 140,843 (25,067) 158,175
Adjusted gross income (11,652) 16,270 18,635
reported
Unreported income 152,495 141,337 139,540
1 It appears that $41,337 should be a negative figure, rather than
positive unreported income as indicated on respondent’s net worth analysis.
Consistent with this conclusion, respondent has determined no 1994 deficiency
arising from any unreported income indicated by the net worth analysis.
Petitioners have not raised, and we do not reach, any issue as to whether any
part of any 1994 net loss should be deductible in 1993 or 1995 as a net
operating loss carryback or carryover. See sec. 172.
The following table, as set forth in respondent’s Answer to
Amended Petition, shows the particular assets and
3 This table, as set forth in respondent’s Answer to Amended
Petition, reflects certain adjustments to the net worth analysis
upon which the notice of deficiency was predicated, as discussed
in more detail, infra.
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