Peter Wood - Page 8

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                            Year          Schedule C Net Profit1                      
                            1995                $204,761.53                           
                            1996                35,146.37                             
                            1997                116,049.14                            
               1The Schedule C net profit that respondent determined in the           
          notice for each of the years 1995 and 1997 is equal to peti-                
          tioner’s gross receipts calculated in accordance with peti-                 
          tioner’s billing invoices and/or purchase orders minus the cost             
          of sales that respondent accepted in the notice as substantiated            
          by petitioner.  With respect to 1995, petitioner’s gross receipts           
          calculated in accordance with petitioner’s billing invoices                 
          and/or purchase orders (i.e., $449,283.08) was larger than                  
          petitioner’s gross receipts calculated under the bank deposits              
          method (i.e., $434,306.59).  With respect to 1997, petitioner’s             
          gross receipts calculated in accordance with petitioner’s billing           
          invoices and/or purchase orders (i.e., $339,646.51) was smaller             
          than petitioner’s gross receipts calculated under the bank                  
          deposits method (i.e., $339,908.45).  The Schedule C net profit             
          that respondent determined in the notice for 1996 is equal to               
          petitioner’s gross receipts calculated under the bank deposits              
          method minus the cost of sales that respondent accepted in the              
          notice as substantiated by petitioner.  With respect to 1996,               
          petitioner’s gross receipts calculated under the bank deposits              
          method (i.e., $310,029.75) was smaller than petitioner’s gross              
          receipts calculated in accordance with petitioner’s billing                 
          invoices and/or purchase orders (i.e., $330,646.69).  The record            
          does not disclose the reasons for the foregoing actions of                  
          respondent.                                                                 
          Respondent further determined in the notice that petitioner was             
          liable for each of the years at issue for additions to tax under            
          sections 6651(a)(1) and 6654(a).                                            
                                       OPINION                                        
               Respondent concedes that section 7491 is applicable in the             
          instant case.  With respect to section 7491(a), respondent                  
          maintains that petitioner has not introduced credible evidence              
          under section 7491(a)(1) or complied with section 7491(a)(2) and            
          that therefore the burden of proof with respect to respondent’s             





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