- 3 -
Petitioners maintained one joint bank account during 1996
and 1997. Using this account, petitioners deposited all wages
and business income and paid all business and household expenses.
Petitioners hired John J. Poltonowicz (Mr. Poltonowicz), a
certified public accountant, to prepare their 1996 and 1997
Federal income tax returns. Mrs. Haggart provided Mr.
Poltonowicz with her Forms W-2, Mr. Haggart’s Forms 1099-MISC,
and a list of his business expenses. For additional guidance in
preparing the 1996 and 1997 returns, Mr. Poltonowicz reviewed
petitioners’ returns from previous years which were prepared by a
different accountant.
For 1996 and 1997, Mr. Poltonowicz prepared Schedules C,
Profit or Loss From Business, for Mr. Haggart’s business.
Petitioners claimed, and respondent disallowed, the following
amounts on their Schedules C as deductions and cost of goods
sold:3
Claimed Disallowed
Schedule C 1996 1997 1996 1997
Total Expenses1 $24,710 $28,863 $12,360 $14,763
Cost of Goods Sold 21,456 31,596 21,456 31,596
1 These expenses included depreciation, insurance, legal and
professional services, supplies, utilities, laundry, bank
charges, and car and truck expenses.
It is unclear how the claimed Schedule C expenses and cost of
3 Respondent also determined that Mr. Haggart failed to report
$79 of income attributable to wages he earned in 1996 from USX
Corp. reported to him on a Form W-2.
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