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payments for 2000 and offered no evidence at trial to indicate
any part of the $9,009,882 was nontaxable income.
Respondent conceded that petitioner properly reported his
Schedule C gross receipts of $4,196,750 in 2001. However,
respondent allowed petitioner only $57,931 of the $4,238,057 he
reported as Schedule C costs of goods sold and deductions in
2001. Using the ratio of the allowed amount to income for 2001
(1.38 percent),8 respondent computed allowable business
deductions for petitioner’s 1999 and 2000 (as conceded) tax years
of $50,388 and $124,336, respectively.9
The notice of deficiency was issued on July 29, 2005.
Petitioner timely filed his petition on October 25, 2005.
OPINION
A. Procedural Rules
Petitioner contends his due process rights were violated
when respondent failed to provide him or his representative a
notice of bypass for the years at issue pursuant to section
601.506(b)(1), Statement of Procedural Rules, and a 30-day letter
stating the examiner’s determinations pursuant to section
601.105(d)(1), Statement of Procedural Rules. As a result,
8 $57,931 (2001 allowable Schedule C items)/$4,196,750
(2001 Schedule C gross business receipts) = 0.0138 = 1.38
percent.
9 $3,651,293 (1999 Schedule C gross business receipts) x
0.0138 = $50,388; and $9,009,882 (2000 Schedule C gross business
receipts) x 0.0138 = $124,336.
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