- 9 - calculated the percentage of total expenses for each of the subject years to the corresponding annual gross revenue as 52 percent and determined that petitioners were allowed to deduct as business expenses for each year 52 percent of the year’s annual gross revenue (i.e., 52 percent x $178,230 of annual gross revenue = $92,680 of allowable expenses). She concluded and determined that Mr. Burnett, as the sole proprietor of the newspaper, had received from the newspaper in each year unreported income of $85,550 ($178,230 - $92,680 = $85,550). She determined that both petitioners, by virtue of the fact that they lived in Texas, a community property State, were taxable on equal shares of that income. She determined that Mr. Burnett, by virtue of the fact that he was the newspaper’s sole proprietor and publisher and that Ms. Burnett did not seem to be an active participant in that business, was liable for self-employment tax on his portion of the self-employment income. OPINION6 Petitioners alleged in their petition that the notices of deficiency were invalid because respondent failed to execute an involuntary return that met the definition of section 6020(b). Petitioners also alleged in their petition, and have argued 6 Sec. 7491(a)(1) does not apply in this case. In addition to the fact that respondent’s examination of petitioners’ 1994, 1995, and 1996 taxable years commenced before July 23, 1998, the effective date of the section, petitioners have failed to cooperate with respondent as required by sec. 7491(a)(2)(B).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011