Samuel S. and Laura M. Pinkney - Page 8

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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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