- 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