James P. Ellis - Page 5

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          B.   Petitioner's Individual Income Tax Return for 1999                     
               A Schedule C was also attached to petitioner's Form 1040 for           
          1999.  Petitioner reported gross receipts of $21,600 and contract           
          labor costs of $19,400.  Petitioner deducted depreciation of                
          $7,056; tuxedo dry cleaning expenses of $1,124; car and truck               
          expenses of $1,919; office expenses of $576; supplies expense of            
          $496; and utilities of $948.                                                
               Respondent disallowed deductions for all of the car and                
          truck expenses and all of the contract labor expenses due to lack           
          of substantiation.  Respondent also determined that petitioner is           
          liable for an addition to tax under section 6651(a)(1) for                  
          failure to timely file his 1999 return.                                     
          C.   Petitioner's Individual Income Tax Return for 2000                     
               Petitioner's Schedule C for 2000 again reflected gross                 
          receipts of $21,600 and contract labor costs of $19,400.                    
          Petitioner also deducted $7,980 for depreciation; car and truck             
          expenses of $5,327; office expenses of $444; supplies expense of            
          $503; utilities of $960; and tuxedo dry cleaning expenses of                
          $1,124.                                                                     
               Respondent disallowed deductions for all of the dry cleaning           
          and car and truck expenses as well as all of the contract labor             
          and depreciation expenses due to lack of substantiation.                    
          Respondent also determined that petitioner is liable for an                 








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