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G. Notices of Deficiency
1. Overview
On November 9, 2004, respondent issued to petitioners a
notice of deficiency for 1997 and a notice of deficiency for 1998
and 1999. The notices of deficiency determined the following
adjustments to amounts reported on petitioners’ Federal income
tax returns for 1997, 1998, and 1999:
1997 1998 1999
Unreported rental income $3,000 -0- -0-
Unreported interest income 2,331 -0- $115
Unreported capital gains income -0- $155 -0-
Unreported Schedule C income 63,852 36,368 49,368
Total unreported income 69,183 36,523 49,483
Self-employment tax deduction (4,614) (3,531) (4,676)
Disallowed itemized deductions 1,795 -0- 1,424
Disallowed alimony expense 2,436 1,488 624
Disallowed Schedule C expenses 29,276 13,615 23,648
Total increases to income 98,076 48,095 70,503
The notices of deficiency itemized the disallowed Schedule C
expenses as follows:
Insurance $1,392 -0- -0-
Meals and entertainment 1,588 $3,302 $1,374
Supplies 1,508 835 -0-
Travel 9,737 -0- 4,129
Business use of home -0- 9,478 5,442
Rent or lease expense -0- -0- 7,476
Office expense -0- -0- 246
Legal and professional -0- -0- 556
Depreciation -0- -0- 1,175
Other expenses 15,051 -0- 3,250
Total 29,276 13,615 23,648
2. Respondent’s Bank Deposits Analyses
Respondent determined the amounts of unreported income
listed in the notices of deficiency by performing bank deposits
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Last modified: November 10, 2007