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Petitioner did not keep contemporaneous books and records of
his costs of goods sold or business deductions for the years at
issue and did not testify at the trial. At trial, petitioner
offered no evidence to substantiate the reported 1999 Schedule C
costs of goods sold or deductions and did not claim or
substantiate that petitioner had any Schedule C costs of goods
sold or deductions for 2000.
To substantiate petitioner’s 2001 Schedule C costs of goods
sold and deductions, petitioner merely produced the 2001 business
ledger prepared for the audit with Agent Bok without any
supporting documentation, except for 18 Forms 1099-MISC reporting
compensation paid to contract employees who performed services
for petitioner in 2001. However, 8 of the 18 Forms 1099-MISC did
not contain the Social Security numbers of the contract employees
reported as receiving compensation, two sets of the Forms 1099-
MISC contained the same Social Security number for different
names, and 7 of the Forms 1099-MISC did not contain addresses.
The 18 Forms 1099-MISC were not filed with the IRS, and the
contract employees indicated on the Forms 1099-MISC as receiving
compensation were not listed as taxpayers in respondent’s
database.
The Court was not provided with any information about
petitioner’s business operation or how expenses were incurred.
As a result, the Court did not have a reasonable basis upon which
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