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petitioner reported both gross receipts and gross income of
$26,656, car and truck expenses of $17,181, and other expenses of
$7,085.
During the examination of the tax returns, petitioner did
not present any documentation for the car and truck expenses.
Respondent’s examining agent, however, accepted petitioner’s
representation that petitioner drove from his place of employment
to his Schedule C activity at the rate of 4 miles per day, 6 days
a week. Petitioner was accordingly allowed deductions for car
and truck expenses of $455 for 2002, and $449 for 2003, based on
the applicable standard mileage rates for those years.
With respect to other expenses deducted on the Schedules C,
the only evidence presented during examination was an earnings
statement for the period ending December 15, 2002. The earnings
statement indicated that “receivables” of $1,754.10 and the cost
of tools of $118.21 were withheld from petitioner’s paycheck.
The examining agent accepted petitioner’s explanation that the
withheld amounts represented money that petitioner borrowed from
his employer to pay for a computer and tools. Petitioner was
allowed deductions for other expenses of $1,872 for each of 2002
and 2003.
Respondent issued to petitioner statutory notices of
deficiency for 2002 and 2003 determining that petitioner failed
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