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some or all of the subject years Forms 1099-MISC, Miscellaneous
Income, which appeared to have been for printing jobs performed
for third parties. First, after driving by the headquarters of
the newspaper, she purchased a recent (October 23, 1997) edition
of the newspaper which she determined was representative of an
entire year. Second, as to that edition, she measured the
dimensions of all of the advertisements, counted all of the words
in the classifieds, and applied the appropriate classified and
advertising rates stated therein to calculate the newspaper’s
total advertising revenue for a single weekly edition. Third,
she multiplied that amount by 52 (weeks) to arrive at an annual
gross revenue of $178,230 for the newspaper. The agent did not
include in her gross revenue calculation any other income
realized by the newspaper such as subscription income. The
annual subscription rate multiplied by the number of paid
subscribers would have resulted in additional income of $24,833
in 1995, $29,000 in 1996, and $39,000 in 1997.
Fourth, in an effort to calculate petitioners’ expenses
relating to the annual gross revenue, the agent reviewed the
expenses which petitioners had claimed for the newspaper on their
1992 tax return. She reduced the total amount of the 1992
expenses shown on the return by the wages and employment taxes
included therein after determining that petitioners had not paid
any wages or employment tax in 1995, 1996, or 1997. She
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