Joel Rappaport - Page 6

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               3.   Petitioner’s Tax Returns for 2001-04                              
               On a date not stated in the record, petitioner received an             
          extension to file his 2001 return on or before October 15, 2002.            
          Petitioner did not file income tax returns for tax years 2002-04.           
          E.   Notice of Deficiency for Petitioner’s Tax Year 2001 and the            
               Pleadings in This Case                                                 
               Respondent determined a deficiency in petitioner’s income              
          tax for 2001 on the basis of information reported by third                  
          parties.  Respondent mailed the notice of deficiency to                     
          petitioner on March 22, 2004.  Petitioner had not filed an                  
          individual income tax return for 2001 at that time.                         
               Petitioner filed a petition in which he contends that he is            
          entitled to deduct certain expenses.  Petitioner faxed a Form               
          1040 for 2001 to respondent’s Appeals Office less than a month              
          before the trial of this case.  He reported income of $317,525,             
          which included amounts not previously reported to respondent by             
          third-party payers.  The $317,525 consisted of:  $160,000 of                
          wages paid by JRC; $4,033 of interest; $4 of dividends; $25,613             
          of capital gains; and $127,875 from rent.                                   
               On his Form 1040 for 2001, petitioner deducted the following           
          expenses that flowed through to him from JRC and RSC:                       











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