Robert J. Damron - Page 3

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               Respondent determined a deficiency of $2,272 in petitioner’s           
          Federal income tax for the year 2001.  The sole issue for                   
          decision is whether petitioner is entitled to deductions for                
          certain expenses claimed on Schedule C, Profit or Loss From                 
          Business, for the year in question in excess of amounts allowed             
          by respondent.                                                              
               Some of the facts were stipulated.  Those facts, with the              
          annexed exhibits, are so found and are made part hereof.                    
          Petitioner’s legal residence at the time the petition was filed             
          was San Francisco, California.                                              
               During the year 2001, petitioner was an employee of the U.S.           
          Postal Service.  Petitioner was also engaged in a self-employed             
          trade or business activity that he called Innovative Financial              
          Services.  The activity was described as “negotiation and other             
          services for business/individuals”.                                         
               On Schedule C, which petitioner included with his 2001                 
          Federal income tax return, he reported the following gross income           
          and expenses from this activity:                                            

               Income                                       $ 1,200.00                
               Expenses:                                                              
               Legal and professional     $  300.00                                   
               Office expenses             6,659.04                                   
               Rent (business property)    3,500.00                                   
               Taxes/licenses                200.00                                   
               Meals/entertainment            24.65                                   
               Utilities                     544.78                                   
               Wages                       3,600.00        14,828.47                  
               Loss                                        ($13,628.47)               






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