- 16 -
petitioner had $7,745 less unreported income than the amount
determined in the notice of deficiency.3
B. Business Expense
Petitioner argues that respondent’s disallowance of the
$17,000 Schedule C deduction for “administrative Mexico” is in
error. Petitioner stated at trial that the $17,000 represents the
“cost of doing business” in Mexico City. In particular,
petitioner asserts that he lost office equipment valued at “a
little over $10,000” in a burglary, and that he was forced to
scrap an automobile--because “the oil pump or something had gone
bad and the car was basically ruined”--for which he “took a little
over a $7,000 loss”.
It is unclear from the record whether the office to which
petitioner refers in his testimony regarding this issue was the
office of NAFTA, petitioner’s Mexico City-based corporation. A
corporation formed for legitimate business purposes is an entity
3We briefly address a factual issue that was not discussed
by either party--the interrelationship between the rental
activity issue and the unreported income issue. In light of
petitioner’s burden of proof in this regard, see Rule 142(a), we
note that the record does not support a finding that any of the
amounts deposited into petitioner’s bank accounts were derived
from the rental activities. We reach this conclusion based upon
the record as a whole, which establishes, inter alia, that the
property management companies rather than petitioner collected
the rents and paid the expenses therefrom; that petitioner held
only partial ownership interests in several of the properties;
that petitioner may have held bank accounts other than the two
named above; and that no deposits listed in the bank statements
have been identified as having been derived from the rental
properties.
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