- 5 - teachers at an agreed-upon hourly wage. Beginning in November 2000, petitioners received direct reimbursement from BUSD, as described above. GJR’s education expenses exceeded funding for both years in issue, and petitioners paid out-of-pocket for the remainder. GJR was the only student in petitioners’ afterschool program and microschool. Petitioners did not advertise or otherwise seek additional students. Petitioners did not apply for or receive any grants during the years in issue. Petitioners did not maintain a separate bank account for, or have any separate business assets dedicated to, the afterschool program or the microschool. Petitioners timely filed joint Federal income tax returns for the years in issue. Attached to each return was a Schedule C, Profit or Loss From Business, for petitioners’ “special education” activity. Petitioners deducted Schedule C losses with respect to the special education activity of $24,417 and $12,351, and reported adjusted gross income of $229,665 and $229,219 for 1999 and 2000, respectively. On November 6, 2003, respondent sent petitioners a notice of deficiency for the years in issue. Respondent determined that petitioners’ special education activity was not a bona fide business activity entered into for profit and disallowed the claimed deductions. Respondent also determined that petitionersPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011