- 11 - 19951 1996 1997 Gross income $85,151 $112,626 $126,764 Total expenses 96,344 112,589 128,520 Net profit/loss (11,193) 37 (1,756) 1 As amended. G. Notices of Deficiency On January 31, 2001, respondent timely mailed to the Hubers a statutory notice of deficiency for 1995, 1996, and 1997 (the Huber notice of deficiency). Also on January 31, 2001, respondent timely mailed to Waterfall Farms a statutory notice of deficiency for its fiscal years ended November 30, 1995, 1996, and 1997 (the Waterfall Farms notice of deficiency). In the Waterfall Farms notice of deficiency, respondent disallowed the food, lodging, and medical expenses deducted by Waterfall Farms, totaling $1,224 for 1995, $1,297 for 1996, and $16,713 for 1997. Respondent determined that (1) Waterfall Farms failed to establish that the food and lodging expenses were ordinary and necessary business expenses under section 162 and (2) those items are the Hubers’ personal expenses. Respondent further determined that Waterfall Farms was liable for the accuracy-related penalty under section 6662(a). In the Huber notice of deficiency, respondent determined that payments by Waterfall Farms of the Hubers’ food, lodging, and medical expenses resulted in constructive dividends as follows:Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011