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Petitioners filed a joint Federal income tax return for
taxable year 1996. With this return, petitioners filed a
Schedule C, Profit or Loss From Business. This schedule named
petitioners as proprietors of a business (“the Schedule C
business”) engaged in “Mgt, Consulting, Estimating, Bkpr”.
Petitioners reported the following amounts on this schedule:
Gross receipts or sales $10,645
Cost of goods sold (500)
Expenses
Advertising $500
Bad debts 500
Car and truck 3,053
Depreciation 2,446
Insurance 250
Office 250
Rent or lease 1,500
Repairs and maintenance 2,000
Supplies 250
Utilities 240
Total expenses (10,989)
Loss (844)
No income was reported on the Schedule C as having been received
from Olray Corporation for services rendered by petitioners. In
the statutory notice of deficiency, respondent disallowed the
deductions for the car and truck, depreciation, and repairs and
maintenance expenses.
Petitioners argue that the Schedule C business was engaged
in a variety of business activities, one of which was making
deliveries for Olray Corporation. Petitioners testified that
they maintained separate office space on the premises of Olray
Corporation for conducting the activities of the Schedule C
business, and that the business ventures were separate and
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