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tax expenses for the 1999 tax year. * * * A detailed list of
all transactions will be provided if needed by request.
Petitioners also claimed $40,248 as “Unreimbursed employee
expenses” on the Schedule A.
On April 3, 2002, respondent sent petitioners a notice of
deficiency in which respondent determined a deficiency of
$87,751. Respondent disallowed petitioners’ exclusion from gross
income of $236,761, explaining that the amount “has been adjusted
to the amount verified.” Further, respondent disallowed
petitioners’ claimed employee business expense of $40,248
reported on the Schedule A, explaining that “you did not
establish that the business expense shown on your tax return was
paid or incurred during the taxable year and that the expense was
ordinary and necessary to your business”.
On May 28, 2002, the Court filed petitioners’ petition
disputing $39,826 of respondent’s disallowance of business
expenses and the exclusion from gross income of $236,761.
Petitioners argued that they could substantiate the disallowed
amounts.
On June 19, 2003, respondent filed an amended answer with
leave of the Court in which respondent alleged that the
deficiency of $87,751 should be increased to $93,923 to reflect
petitioners’ receipt of a refund of their 1998 State and local
income taxes plus interest income on such refund which was
unreported as income on the 1999 tax return.
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Last modified: May 25, 2011