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filed Form 1040, U.S. Individual Income Tax Return, for 1999
(1999 joint return). In Schedule C, Profit or Loss From Business
(Schedule C), of that return, petitioners reported with respect
to Mr. Larson’s nonemployee business activity gross income
totaling $4,392, total expenses of $4,341, and a net profit of
$51. The $4,392 of gross income reported in Schedule C of
petitioners’ 1999 joint return consisted of nonemployee compensa-
tion of $2,500 from Data Search that it reported in Form 1099
issued to Mr. Larson for 1999 and nonemployee compensation of
$1,8924 from Windermere that petitioners assumed Windermere
reported in Form 1099 issued to Mr. Larson for 1999. Petitioners
did not at any time attempt to verify the accuracy of their
assumption regarding the amount of nonemployee compensation
reported in Form 1099 that Windermere issued to Mr. Larson for
that year.
On May 23, 2001, respondent issued to petitioners a notice
of deficiency (notice) for 1999. In that notice, respondent
determined, inter alia, that the correct amount of nonemployee
compensation that Mr. Larson received from Windermere during 1999
and that petitioners should have reported in Schedule C of the
4Petitioners rounded up to the nearest dollar the $1,891.95
of nonemployee compensation that they assumed Windermere reported
in Form 1099 issued to Mr. Larson for 1999.
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Last modified: May 25, 2011