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Respondent determined a deficiency and an accuracy-related
penalty under section 6662(a) in petitioner’s 1998 Federal income
tax of $4,247 and $849.40, respectively. The issues are (1)
whether petitioner is entitled to deductions on Schedule C,
Profit or Loss From Business, for expenses of $21,442, (2)
whether income shown on the Schedule C is understated by $1,597,
(3) whether petitioner is liable for the accuracy-related penalty
under section 6662(a), and (4) whether petitioner is entitled to
relief as an innocent spouse under section 6015. Petitioner
resided in Lady Lake, Florida, at the time the petition was
filed.
Background
The facts may be summarized as follows. Petitioner was
divorced in December 1999. For the taxable year 1998, petitioner
and her former husband filed a joint Federal income tax return.
On Schedule C of that return, they reported income of $3,571 and
deductions of $21,442 from a photography equipment rental
business. The deductions claimed consisted of:
Car and truck expenses $13,471
Depreciation 3,441
Legal and professional services 175
Office expense 41
Supplies 1,028
Utilities 573
Computer upgrade 1,028
Telephone 182
Work tools 321
Postage 118
Travel expenses 1,064
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Last modified: May 25, 2011