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use of petitioners’ home. This resulted in a reported business
loss of $920. Mrs. Butler’s Schedule C business expenses were as
follows:
Line 10 Car and truck expenses $5,099
Line 16b Interest (other) 1,042
Line 17 Legal and professional services 125
Line 18 Office expense 656
Line 23 Taxes and licenses 150
Line 24d Travel, meals, and entertainment 703
Line 25 Utilities 804
Line 27 Other expenses 2,080
Line 28 Total expenses $10,659
Line 30 Expenses for business use of your home 771
Line 31 Net profit or loss ($920)
On their Schedule E for taxable year 2002, petitioners
reported income of “rents received” of $1,200 and deducted $3,368
in expenses and depreciation. This resulted in a reported
“Supplemental Loss” of $2,168. Petitioners’ Schedule E expenses
were as follows:
Line 6 Auto and travel $655
Line 16 Taxes 237
Line 17 Utilities 224
Line 18 Other (yard work and gas mower) 322
Line 20 Depreciation expense or depletion 1,930
Line 21 Total expenses $3,368
On October 14, 2004, respondent issued petitioners a notice
of deficiency for taxable year 2002. In the notice of
deficiency, respondent disallowed petitioners’ claimed deductions
for medical and dental expenses along with gifts to charity. The
dollar amount of the remaining itemized deductions was less than
the 2002 standard deduction for taxpayers married filing jointly;
therefore, respondent computed petitioners’ 2002 tax deficiency
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Last modified: May 25, 2011