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Petitioner testified that Roderick performed a number of
tasks for him in 2002, such as recruiting clients, setting up
meetings, and making presentations. Petitioner typically paid
Roderick in cash, although Roderick sometimes received payment by
check. Petitioner testified that he recorded the payments in a
notebook, which was not made part of the record. Petitioner and
Roderick later created receipts to correspond to the payments,
including receipts created at the end of 2002. The receipts were
made on preprinted, numbered forms. Some of the receipts were
not written in chronological order. For example, receipt No.
804201 is dated April 30, 2002, while receipt No. 804202 is dated
January 14, 2002.
Petitioner filed a Form 1099-MISC for Roderick, as well as a
Form 1096. However, both the Form 1099-MISC and the Form 1096
were filed late. Roderick did not report the $5,460 as income.
Petitioner contends Roderick was not required to file a 2002 tax
return because he had little or no additional income that year.
Respondent introduced evidence, however, indicating that Roderick
earned $8,136 of wage income from United Airlines Inc., $675 of
gambling winnings, $8,541 of unemployment benefits, and $295 of
nonemployee compensation from Nuways, Inc.
Examining all the facts and circumstances, we conclude that
petitioners cannot deduct the $5,460 as a trade or business
expense. The receipts introduced to substantiate the payments to
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