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Petitioner timely filed his Federal income tax returns for
each year in issue. He reported adjusted gross income of
($1,914) in 1993, $1,844 in 1994, and $3,559 in 1995.
Petitioner’s reported tax liabilities were $362 in 1993, $280 in
1994, and $600 in 1995. Each of the returns petitioner filed
during the years in issue, as well as those filed in 1991 and
1992, includes a Schedule C, Profit or Loss From Business, for
Grand Video. Income, deductions, and profits or losses reported
on the Schedules C are as follows:
1991 1992 1993 1994 1995
Gross income $19,459 $27,998 $47,722 $47,488 $43,956
Deductions 19,629 28,103 45,157 45,504 39,713
Net profit (loss) (170) (105) 2,565 1,984 4,248
With the possible exception of 1995, no deductions are
claimed for wages paid in cash to petitioner’s employees during
any of the years listed above.
Each return was prepared by a paid income tax return
preparer. With respect to the items listed on the Schedules C,
petitioner provided the return preparer with the cash journal and
bank records for the business account. For at least 1995, the
return preparer relied upon petitioner’s statement as to the
amount of income he earned through Grand Video.
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