-16-
1 The 1999 Schedule C did not identify any of
these “other expenses”.
E. Amended Returns
On their 1998 Federal income tax return, petitioners
reported adjusted gross income of $73,361. The $73,361 consisted
of the following reported items and amounts:
LeBloch’s wages from IRS $71,091
Interest 1,004
Schedule C net profit 23,193
IRA deduction (2,000)
One-half of self-employment tax (1,639)
Alimony paid (18,288)
Adjusted gross income 73,361
On their 1999 Federal income tax return, petitioners reported
adjusted gross income of $104,971. The $104,971 consisted of the
following reported items and amounts:
LeBloch’s wages from IRS $72,130
Michelsen’s wages from NT 31,000
Interest and ordinary dividends 84
Taxable refunds 90
Schedule C net profit 14,029
Capital gain 53
One-half of self-employment tax (991)
Alimony paid (11,424)
Adjusted gross income 104,971
On or about April 14, 2002, after the Commissioner had begun
his audit of the subject years and had proposed his adjustments
increasing petitioners’ taxable income to reflect the unreported
income ascertained under the bank account analyses, petitioners
filed an amended 1998 Federal income tax return claiming without
further explanation that $21,554 reported as compensation
received from NT during 1998 was really a loan repayment. At the
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