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On December 30, 1996, petitioners filed with the IRS a Form
1040 for the 1994 taxable year (1994 return). On the 1994
return, petitioners reported negative adjusted gross income of
$11,364 and an NOL carryforward of $51,284. Petitioners reported
deductions for travel expenses of $9,258 and $24,847 on Form 2106
and Schedule C, respectively. On the Schedule C for ISOA
Consulting, petitioners included “Royalties paid” of $46,200 as
part of the cost of goods sold. Petitioners also claimed
multiple deductions for some of the same expenses on the 1994
return.
In August 1997, petitioners sent to the IRS a second Form
1040 for the taxable year 1994 with the word “Revised” written at
the top of the first page, as well as on several attached pages
(1994 “Revised” return). On the 1994 “Revised” return,
petitioners reported deductions for travel expenses of $5,101 and
$29,533 on Form 2106 and Schedule C, respectively.
On the Schedules C for ISOA Consulting attached to the 1994
returns sent to respondent, petitioners reported the following
amounts:
1994 1994
Return1 “Revised” return
Gross income ($2,692) $13,055
Total expenses (42,272) (34,939)
Net loss (44,964) 2(20,344)
1 As noted by petitioners on both the Schedule C and Schedule E, Supplemental Income
and Loss, attached to the 1994 return, these amounts included petitioners’ portion
of the gross receipts and expenses from ISOA, Inc.
2 This amount is a mathematical error and should have been $21,884.
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Last modified: November 10, 2007