- 3 -
measurements on the bay throughout the year using a yacht
petitioners had owned since approximately 1984. Mr. Brayshaw
began selling this software in early 1997.
In addition, Mr. Brayshaw prior to 1996 had formed a
corporation named First Draft Legal System, Inc. (FDLS). This
corporation was engaged in the sale of a computer software
program which automated the creation of legal documents. A
separate bank account was maintained in the corporation’s name.
For taxable year 1996, a Federal income tax return was filed for
FDLS. This return reported $57,553 in income, $825 in cost of
goods sold, and $55,500 in salaries, leaving $1,228 in taxable
income. Mr. Brayshaw was an employee and/or an independent
contractor of FDLS. Finally, Mr. Brayshaw was engaged in
“database work” which was unrelated to either of his other
business activities.
Prior to 1996, petitioner wife (Ms. Brayshaw) conducted a
medical consultation business. By 1996, however, she had ceased
operating this business.
Petitioners filed two Schedules C, Profit or Loss from
Business, with their joint Federal income tax return for taxable
year 1996. The first was filed for an alleged business activity
of Ms. Brayshaw, the second was for the business activities of
Mr. Brayshaw. In the statutory notice of deficiency, respondent
disallowed all of the expenses claimed on each Schedule C,
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