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Petitioner did not file a tax return for any of his taxable
years 1995, 1996, or 1997.7 Petitioner made estimated tax pay-
ments in the amounts of $11,824, $3,500, and $2,000 for those
respective years.
On June 4, 2002, respondent issued a notice to petitioner
with respect to his taxable years 1995, 1996, and 1997. In that
notice, respondent determined, inter alia, that petitioner had
the following unreported Schedule C net profit8 for the years at
issue:
7In February 1998, petitioner and his spouse filed an appli-
cation for a mortgage (petitioner’s mortgage application) on
their secondary residence in Deerwood, Minn. As noted above,
petitioner did not file a tax return for any of the years at
issue. However, attached to petitioner’s mortgage application
were copies of unfiled returns (petitioner’s unfiled returns) for
those respective years. Schedule C, Profit or Loss From Business
(Schedule C), of each of petitioner’s unfiled returns for the
years at issue reflected that petitioner operated a sole propri-
etorship which was engaged in the business of selling jewelry and
gift items. Those respective Schedules C claimed net profit of
$142,056.13, $132,793.19, and $102,107.20, respectively.
8In determining in the notice petitioner’s Schedule C net
profit for each of the taxable years 1995, 1996, and 1997,
respondent accepted as substantiated by petitioner the following
amounts of cost of sales incurred by petitioner’s sole propri-
etorship:
Year Cost of Sales
1995 $244,521.55
1996 274,883.38
1997 223,597.37
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