Ragnhild A. Westby - Page 12

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          not obtain or review copies of deposited items from all of the              
          financial institutions with which petitioner maintained accounts            
          during 1989.  In preparing the original 1989 bank deposits                  
          analysis, respondent failed to identify and subtract numerous               
          nontaxable items and did not adjust the analysis for all of the             
          income sources reported on petitioner’s 1989 tax return.                    
               B.  Schedule C Deductions                                              
               Petitioner deducted the following Schedule C expenses on her           
          Federal income tax returns for the years at issue:                          
          Sch. C expense                                                              
          category         1987               1988      1989      1990                
          Advertising              $98       $160      $513      $2,384               
          Bank charges             469       1,035     120       120                  
          Car & truck         6,672          8,807     5,354     3,240                
          Collection fees           --          --        850       --                
          Deprec./sec. 179    2,546          11,974    2,444     1,467                
          Dues & pubs.        2,337          3,867     2,675     4,095                
          Employee benefits   2,057          2,243     5,274     3,998                
          Insurance           514            3,677     3,745     3,565                
          Interest            10,034         3,053     2,926     2,070                
          Legal & prof.       5,104          7,239     6,128     13,536               
          Rent                11,460         10,256    9,706     13,334               
          Supplies       4,174               12,297    13,139    7,263                
          Taxes               1,235          4,908     5,051     10,601               
          Travel              1,039          --        1,601     1,988                
          Meals & enter.      896            1,961     795       3,286                
          Utilities & telephone    838       3,784     6,152     3,515                
          Wages               13,991         19,203    26,238    29,054               
          Moving expense      3,258          -0-       -0-       -0-                  
          Process services    2,482          2,495     915       1,822                
          Contract services   4,637          10,618    9,617     10,079               
          Court fees          2,002          7,458     9,104     6,699                
          Miscellaneous          355       6,424     3,343     2,427                  
          Total Sch. C                                                                
          deductions          76,198     121,459   115,690   124,543                  








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