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$9,317 in telephone services and $4,072 in seminar costs. Her
Schedule C reflected $313,217 of deductions for taxable year 1995
which included, inter alia, $13,737 for advertising and $7,579
for car and truck expenses. Petitioner noticed that the amounts
of tax due reflected on her 1994 and 1995 returns were
significantly different from other years, but she did not
question the calculations. Petitioner timely filed her 1994 and
1995 returns and paid the amount of tax shown due on the returns.
Sometime before July 1998, respondent began the examination
of petitioner’s 1994 and 1995 tax years. As a result petitioner
consulted Mary Crenshaw, an acquaintance through whom she
acquired insurance coverage and who petitioner believed was a
C.P.A. Petitioner provided her bank statements to the
acquaintance who turned them over to respondent’s examiner.
Respondent’s examiner raised substantiation issues regarding
petitioner’s claimed Schedule C deductions and discovered a
reporting error. In that regard, it was discovered that
petitioner did not report her Form 1099 income from her business.
Further, petitioner duplicated the omission error by deducting
the Form 1099 income on her Schedule C.
After discovering these problems, petitioner hired attorney
Warren Nemiroff in July 1998. Upon his advice, she submitted
amended returns on November 16, 1998, which reflected the
following revised calculations: (1) Schedule C deductions for
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