- 7 - from the profits,3 if any, that might arise, and that any such profits would be shared by petitioner and Melissa on a 50-50 basis. However, during 1999 and prior thereto, petitioner and Melissa did not have a mutual understanding as to whether petitioner’s monetary interest would continue after she had been fully reimbursed for her expenditures in furtherance of Melissa’s career or would terminate at that point, in which case Melissa would have the right to all future profits from the enterprise (Cool G Records). The Schedule C included in petitioner’s 1999 amended return submitted to respondent on April 26, 2002 (the 1999 amended return), reported zero gross receipts for Cool G Records and expenses totaling $11,444, for a net loss of $11,444. During the audit, petitioner substantiated $3,354 in advertising expenses, $1,492 in car and truck expenses, and $3,8404 for rental of 3 It is not clear what petitioner and Melissa mean by the term “profits”. Based upon their testimony, however, we interpret their usage of that term to mean annual profit rather than overall enterprise profit (i.e., annual profit rather than receipts in excess of cumulative expenditures since the inception of the enterprise.) 4 The parties stipulated that the $3,840 deduction reported on Schedule C of the amended return represented “office space rented for 6 months in Hollywood at $550.00 a month, for a total of $3,850.00.” Six months of rent at $550 per month totals $3,300, not $3,850. We assume that the reference in the stipulation to 6 months and the Schedule C inclusion of a $3,840 rental expense are both in error, and we find that (1) the rental was for 7 months at $550 per month and (2) the total rental expense was $3,850.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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