- 3 -
dividends, pensions, and wages of $61,929 and $60,589,2
respectively. Petitioners deducted losses of $24,554 in 1995 and
$24,729 in 1996 from the used-car activity (Mayo’s Auto Sales).
Petitioners’ Schedule C for the years in issue showed the
following:
1995 1996
Gross Income $10,530 $11,580
Less:
Insurance $2,320 $2,520
Interest 6,311 5,893
Legal expenses 130 140
Office expenses 291 -0-
Repairs 6,450 230
Supplies 16,310 -0-
Taxes & licenses 470 -0-
Utilities 2,802 -0-
Car & Truck -0- 4,464
Wages -0- 568
Other expenses -0- 122,494
Total expenses 35,084 36,309
Loss $24,554 $24,729
1Other expenses consisted of cleaning supplies ($147), tags
and licenses ($360), auto parts ($3,657), State inspection
($150), car purchases ($15,420), rental uniforms ($780), and
office and car phone ($1,980).
Mayo’s Auto Sales began operations in 1989 or 1990, and has
never operated at a profit. For the taxable years 1993 and 1994,
petitioners reported losses of $14,225 and $16,021, respectively,
from this activity. The records of the Virginia Department of
Motor Vehicles show that petitioners sold four automobiles during
2 The 1996 income also includes gambling income and capital
gains.
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Last modified: May 25, 2011