Joyce E. Hastings - Page 7




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                1994            -0-             26,876          26,876                
                1995           -0-             31,322          31,322                 
             Totals           $11,154         $132,253        $121,099                
               In 1993, petitioner received $9,774 for pasturing horses               
          owned by a third party and $627.50 from a horse show.                       
               Petitioner did not maintain a separate bank account for her            
          horse activity.  Petitioner marked an “H” on each check written             
          for a horse expenditure.  Invoices or bills underlying each check           
          expenditure were kept separately for each horse and accumulated             
          and maintained on a monthly basis.                                          
               Petitioner maintains a trailer on the Julian, California,              
          property that serves as her residence when she is tending the               
          horses there.                                                               
                                       OPINION                                        
          I.  Unreported Income                                                       
               The income of a sole proprietorship must be included in                
          calculating the income and tax liabilities of the individual                
          owning the business.  Sec. 61(a)(2).  The net profit or loss of             
          such a business is generally computed on Schedule C, Profit or              
          Loss From Business.                                                         
               Taxpayers are required to maintain records sufficient to               
          establish the existence and amount of all items reported on the             
          tax return, including both income and deductions therefrom.  Sec.           
          6001; sec. 1.6001-1(a), Income Tax Regs.  In the absence of books           
          and records adequate to determine a taxpayer's proper tax                   





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