Everett J. Diers - Page 4

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          C.   Automobile Expenses                                                    
               For his work-related travel, petitioner estimated total                
          mileage for 1996 at 33,000 miles.  Petitioner did not maintain a            
          log of work-related travel during 1996.                                     
          D.   Home Office Expenses                                                   
               Petitioner lived with his girlfriend and maintained a home             
          office in her house.  Petitioner paid her $250 per week in cash.            
          Neither petitioner nor his girlfriend allocated a specific                  
          portion of the weekly payment to particular expenses.  Instead,             
          petitioner left it to his girlfriend’s discretion how the money             
          was to be used.  Petitioner did not maintain receipts for any               
          home office expenses.                                                       
          E.   1996 Tax Return                                                        
               On April 15, 1997, petitioner timely filed his 1996 Federal            
          income tax return.  On his 1996 return, petitioner claimed income           
          from insurance and other sales of $5,796 after Schedule C                   
          deductions of $8,910 and $3,600 for automobile and office                   
          expenses, respectively.  Because of a move from Albuquerque, New            
          Mexico, to El Paso, Texas, petitioner never received the Forms              
          1099 issued for his income from American, Capitol, or Life USA              
          for his 1996 tax year.                                                      
               Respondent issued a notice of deficiency to petitioner                 
          regarding his 1996 tax year.  In the notice of deficiency,                  
          respondent determined, inter alia, that for the year 1996                   

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