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1995 1996
Vehicle expense $2,949 $2,520
Parking fees, tolls, and transportation 24 32
Other expenses
“Business auto loan interest” 698
“Office rent” 4,800
“Postage and express” 64
“Office supplies” 80
“Grading services” 7,513
Unspecified 3,647
Less reimbursements by employer (653) (168)
Total (adjusted for rounding errors) 15,474 6,031
Respondent disallowed the deductions with respect to expenses of
$13,011 in 1995 and $3,166 in 1996.3
For taxable year 1995, petitioner filed a Schedule C, Profit
or Loss From Business, for a sole proprietorship known as “Smith
Table Pads”. The schedule listed the principal business of the
proprietorship as “distributor of custom fitted table pads and
teaching”. On the schedule, petitioners claimed deductions for,
among others, the following: interest expense of $2,163; rent
expense of $5,800; travel expense of $2,642; and meal and
entertainment expense of $680. Respondent disallowed each of
these deductions in full, except with respect to interest expense
of $731.
During both of the years in issue, petitioners resided in
residences owned by petitioners in their own names.
In 1995, petitioner organized a corporation under Colorado
law known as Smith Corporation. The articles of incorporation
3Respondent’s additional adjustment to the total of the 1995
miscellaneous itemized deductions, which was based on a change in
petitioners’ adjusted gross income, is computational and will be
resolved by the Court’s holding on the issues in this case.
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