Sandra Holmes - Page 3




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          sexual harassment or discrimination.                                        
               On September 13, 2004, because petitioner had not filed her            
          2001 individual Federal income tax return, respondent prepared              
          for petitioner a substitute tax return using third-party return             
          information and determined against petitioner a tax deficiency of           
          $35,380, plus the additions to tax listed above.                            
               On or about September 5, 2006, 2 weeks prior to trial,                 
          petitioner signed and submitted to respondent her 2001 individual           
          Federal income tax return and claimed thereon a $47,600                     
          miscellaneous legal expense deduction under section 212, subject            
          to the 2-percent adjusted-gross-income floor of section 67(a).              
          At trial, after settling all other issues and without objection             
          from respondent, petitioner was allowed to raise the issue as to            
          the claimed $47,600 legal expense deduction.                                
               Of the $47,600 in legal expenses petitioner seeks to deduct,           
          petitioner acknowledges that in 2001 she paid her attorney no               
          more than approximately $7,000, representing out-of-pocket legal            
          expenses.                                                                   
               Petitioner has not submitted bills, receipts, canceled                 
          checks, or other records that would establish that petitioner               
          paid any of the legal expenses that petitioner seeks to deduct.             
               Petitioner admits that she is a cash method taxpayer.                  










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