Marie-Francine T. Grow - Page 3

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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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