Richard G. and Carolyn J. Newhouse - Page 3




                                        - 2 -                                         
               Respondent determined for 1995 a deficiency in petitioners'            
          Federal income tax of $3,814 and an addition to tax under section           
          6651(a)(1) of $509.  The issues for decision are whether Richard            
          Newhouse (petitioner):  (a) Was an independent contractor                   
          entitled to deductions for business expenses on Schedule C,                 
          Profit or Loss From Business; (b) is entitled to business expense           
          deductions in excess of those allowed by respondent; and (c)                
          failed timely to file his Federal income tax return without                 
          reasonable cause.                                                           
                                     Background                                       
               The stipulation of facts and the accompanying exhibits are             
          incorporated herein by reference.  Petitioners resided in Garden            
          Grove, California, at the time their petition was filed in this             
          case.                                                                       
               Petitioner is a professor of geography.  He started teaching           
          at junior colleges on a part-time basis in 1989.  In 1995,                  
          petitioner taught at four different junior colleges from each of            
          which he received a Form W-2, Wage and Tax Statement.                       
          Petitioners reported $9,473 as income earned from his teaching              
          jobs on Schedule C of their 1995 Federal income tax return.  The            
          Forms W-2 issued to petitioner by the junior colleges and one               
          issued to him by "Safeway Incorporated" list amounts totaling               
          only $7,228.  Petitioners also included $7,228 of petitioner's              
          Form W-2 income as wages on line 7 of the U.S. Individual Income            






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