John Michael Kernan - Page 6

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               Initially, petitioner commuted between Memphis and Knoxville           
          either by automobile or by commercial airline.  Both methods                
          proved to be time consuming and costly.  Petitioner made a                  
          cost/benefit analysis from which he concluded it would be more              
          economical to purchase an airplane to make the weekly commute               
          between Knoxville and Memphis.  Accordingly, petitioner, in early           
          October 1996, purchased a Cessna model 192 airplane and, after              
          paying for flying lessons, thereafter used the plane to commute             
          between Memphis and Knoxville.                                              
               Petitioner's contract with Josten's was completed in                   
          November 1996, and he had no further contractual or employment              
          relationship with Josten's.  Petitioner then gave up the Memphis            
          apartment and continued living with his girlfriend at Knoxville.            
          He did not find employment at Knoxville.  In March 1997, the                
          relationship between petitioner and his girlfriend terminated.              
          Petitioner moved back to Austin, Texas, and found employment                
               On his Federal income tax return for 1996, petitioner                  
          reported the income and expenses of the contract activity with              
          Josten's as a trade or business activity, which respondent does             
          not dispute.  Petitioner reported gross income of $216,616,                 
          expenses of $198,677, and a net profit of $17,939.  In the notice           
          of deficiency, respondent disallowed deductions claimed for                 
          expenses in the amount of $40,023.  The disallowed deductions               

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