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overcharges for water and sewer services, and a direction that
the association maintain the common area around petitioner's
condo.
As a result of his litigation in State court, petitioner
became convinced that the association had been "selling licences
and easements to the common areas in the tens of thousands of
dollars." He was also convinced that the association had a
profitable operation of the on-site laundry facilities.
Petitioner is a "network engineer". He reported on his
Federal income tax returns wages from his employment with Daou
Systems in 1997 and Network Computing Device, Inc., in 1997 and
1998. He also attached to his tax returns for those years
Schedules C, Profit or Loss from Business, for "Colvin Business
Services II". The Schedules C reported cost of goods sold in
excess of gross receipts for both years (gross receipts for 1998
were zero) and amounts for legal and professional service
expenses.
Some of the legal expenses petitioner deducted relate to
the State court litigation against the association. Other of the
legal expense deductions relate to a suit by petitioner to
recover wages from a former employer. Petitioner's mother, in
preparing his return, tried to allocate the various legal
expenses to the suit against the employer and to the suit
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