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In reporting gross income from his sole proprietorship for
1998, petitioner Michael H. Visin reduced gross receipts by cost
of goods sold. In part III of his Schedule C for 1998,
petitioner Michael H. Visin claimed cost of goods sold as
follows:
Materials and supplies $2,847.30
Other costs: computer
equipment and software +3,450.00
Cost of goods sold 6,297.30
Petitioners did not attach to their 1998 income tax return a
Form 4562, Depreciation and Amortization. Part I of that form is
entitled “Election To Expense Certain Tangible Property (Section
179)”, and it is the form that respondent has designed for
taxpayers who wish to expense, rather than depreciate, qualifying
property.
In the notice of deficiency, respondent disallowed a portion
of the deduction claimed by petitioners in 1997 and 1998 for the
business use of their apartment. Respondent based the
disallowance solely on the limitation on deductions set forth in
section 280A(c)(5). Respondent did not adjust either the gross
amount claimed by petitioners for the rental of their apartment
or the business use percentage appearing on either Form 8829.
3(...continued)
discrepancies between petitioners’ Form 8829 for 1997 and Form
8829 for 1998 regarding “Area used * * * for business” and “Total
area of home”.
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Last modified: May 25, 2011