-14-
Operating expenses:
Direct expenses:
Utilities $951
Indirect expenses:
Insurance 844
Repairs and maintenance 1,802
Utilities 2,846
Total 5,492
Business-use percentage .252 1,382
Carryover from 1997 2,367
Total 14,702
Depreciation:
Current depreciation 2,388
Depreciation carryover
from 1997 2,388
Total 4,776
Total 9,478
1 We note petitioners’ $2 adding mistake.
The 1998 Schedule C itemized the total expenses of $4,137 as
follows:
Supplies $835
Meals and entertainment
(after 50-percent reduction) 3,302
Total 4,137
3. 1999
For 1999 Federal income tax purposes, petitioners did not
report the income and expenses of the Nature’s Touch shops on
their personal income tax return. Their 1999 personal return
included a 1999 Schedule C that reported the income and expenses
of Michelsen as “Corporate Director/Consultant”.9 The schedule
reported on the basis of an accrual method of accounting that the
9 Although the 1999 Schedule C lists the “Name of
proprietor” as “James and Cathy LeBloch”, the return clarifies on
Schedule SE, Self-Employment Tax, that the income reported on the
Schedule C is that of Michelsen only.
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