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1994 1995 1996
Consulting business Schedule C
Income 75,657 53,804 60,072
Expenses (51,879) (27,527) (42,829)
Expense for business use of home (6,025) (11,362) (4,674)
Net profit 17,753 14,915 12,569
Property management Schedule C
Income1 -0- -0- (336,981)
Expenses
Depreciation 3,536 27,525 --
Insurance 148 -- --
Mortgage interest 106,322 33,487 --
Other interest -- 1,357 8,242
Legal 283 500 --
Office expense 236 -- --
Repairs and maintenance 7,196 -- --
Taxes and licenses 3,659 9,677 --
Travel 586 -- --
Total 121,966 72,546 8,242
Net profit (loss) (121,966) (72,546) (345,223)
Distributorship Schedule C
Income (776) -0- -0-
Expenses (2,655) (809) (1,578)
Net profit (loss) (3,431) (809) (1,578)
1For 1994 and 1995, petitioner reported no inventory at the beginning
and close of each year with respect to the property management and real
estate dealership business. For 1996, he reported opening inventory of
$355,966 and closing inventory of $18,985 for which he reported cost of goods
sold of $336,981. Petitioner did not attach an explanation as to why the
1996 beginning year inventory was different from the 1995 closing inventory.
In December 1997, the IRS began an examination of
petitioner’s 1994-96 returns. On December 21, 1998, respondent
issued petitioner and Mrs. Wood a notice of deficiency for 1994.
On July 19, 1999, respondent issued them a notice of deficiency
for 1995-96. In the notices of deficiency, respondent (1)
increased the capital gain on the sale of the New Jersey house by
$14,117 ($90,888 rather than the $76,771 reported on petitioner’s
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