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The amounts claimed on petitioner’s income tax returns as
business losses and personal itemized deductions were based on
estimates, and most, if not all, were nondeductible personal
expenses. Petitioner was not operating an active business during
the years in issue and had no income from the environmental
engineering service business that he listed on Schedules C,
Profit or Loss From Business, to his 1999 and 2000 Forms 1040.
Petitioner merely estimated the amounts that he would need as
capital when he actually began operation of the business and
deducted amounts that he allegedly “loaned” to the business in
anticipation of its capital requirements.
Petitioner’s claimed itemized deductions were similarly
based on estimates. For example, he deducted $10,000 in 1999 and
$12,000 in 2000, based on his anticipated future medical
expenses. Petitioner deducted as employee expenses what he
calculated to be the amortized cost of his educational expenses
in obtaining professional degrees, the latest of which had been
obtained in 1987. Petitioner overstated the State income tax
withheld from his wages as shown on his Forms W-2, Wage and Tax
Statement. He deducted amounts that represented personal
expenditures for food, water, electricity, and his estimate for
funding of his future retirement, spreading the amounts
throughout his returns and disguising their nature.
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