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Schedule C, petitioner reported gross income of $1,000 and total
expenses of $17,649.
In 2001, petitioner reported Schedule C income of $209 and
adjusted gross income of $145,683. On the attached Schedule C,
petitioner reported gross income of $20,000 and total expenses of
$19,791.
On March 3, 2003, respondent sent petitioner an initial
contact letter asking her to produce books, records, and work
papers used to prepare her Schedule C for 1999. Petitioner did
not produce any books, records, or other work papers in response
to the initial contact letter. Respondent subsequently expanded
the examination to include 2000 and 2001.
On March 18, 2003, respondent sent petitioner a 30-day
letter covering 1999, 2000, and 2001. Petitioner was given the
opportunity to sign a period of limitations extension, but
refused to do so. At the time, petitioner had already filed a
petition with this Court relating to 1997 and 1998. Petitioner
wished to add the 1999, 2000, and 2001 years to the prior case.
In an effort to consolidate the cases, petitioner forewent the
administrative appeal process for the years in issue. The cases
were never consolidated.
On June 26, 2003, respondent mailed petitioner a notice of
deficiency for the years in issue. Respondent determined that
petitioner’s horse activity expenses were not ordinary and
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