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adjusted basis in the car at the time of its sale is at issue in
this case.
On their joint Federal income tax returns for 1995, 1996,
and 1997, petitioners included Schedules C, Profit or Loss From
Business (Schedules C), in connection with petitioner’s air
racing activity. In pertinent part, petitioners claimed the
following travel expenses and labor expenses in connection with
the air racing activity:
Expenses 1995 1996 1997
Travel $37,668 $36,393 $14,726
Labor 60,722 19,019 37,605
In the notice of deficiency, respondent disallowed all of the
travel expenses claimed for each of the years at issue. Of the
labor expenses claimed, respondent disallowed $12,250 for 1995,
$5,000 for 1996, and $17,000 for 1997.
Additionally, on their 1996 return, petitioners included a
Schedule C in connection with petitioner's classic car
restoration and sales activity. On this Schedule C, petitioners
reported sales income of $29,000 and an adjusted basis of $76,771
(reported as cost of goods sold) in connection with the sale of
the aforementioned restored 1970 Plymouth Barracuda automobile.
Thus, petitioners reported a loss of $47,771 from the sale of the
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