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reported income of $270 and claimed expenses totaling $8,692,
resulting in a net loss of $8,422. All but $200 of the expenses
are identified and deducted as “car and truck expenses”. There
is also a Schedule A included with petitioners’ 1998 return.
On that schedule petitioners claimed a $1,837 deduction for
unreimbursed employee business expenses related to petitioner’s
employment with Molly Maid, Inc. Petitioners did not include a
Form 2106 with their 1998 return.
Petitioners’ 1999 return was also prepared by petitioner.
Included with that return is a Schedule C for Morgan Farms.
For that year the business is described as “training/breeding
leader dogs”, and petitioner, rather than Nancy M. Frederick
is identified as the sole proprietor. On that Schedule C,
petitioners claimed deductions totaling $6,884, resulting in a
net loss of the same amount. The expenses are identified as
“car and truck expenses” totaling $5,902, and “veterinary
care” fees of $982. There is also a Schedule A included with
petitioners’ 1999 return. On that schedule, petitioners claimed
an “other miscellaneous” deduction of $1,400. That deduction
relates to the “additional” security deposit that petitioners’
landlord required in connection with the house they rented in
Virginia.
In the notice of deficiency for 1997, respondent (1)
disallowed the bad debt deduction claimed on the Schedule D; (2)
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Last modified: May 25, 2011