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II. Gross Receipts on Schedule C
Petitioner reported gross receipts of $7,791 on Schedule C.
During the examination of her return, petitioner indicated this
figure represented $7,055 from sales of Avon products, a $102
bonus she received from Avon, and $634 from flea market sales.
Respondent accepted the gross receipts as reported.
At trial, petitioner asserted that she had overstated gross
receipts. Petitioner’s testimony was vague, however, and she
introduced no credible evidence to indicate that the figure
reported on Schedule C was incorrect. Furthermore, petitioner
conceded that she failed to report income from Prepaid Legal
Services on Schedule C even though she reported the expenses.
Under the circumstances, we conclude that no adjustment to gross
receipts is appropriate.6
III. Accuracy-Related Penalty
Section 6662(a) provides that a taxpayer may be liable for a
penalty of 20 percent of the portion of an underpayment of tax
attributable to negligence or disregard of rules or regulations.
Sec. 6662(a) and (b)(1). Negligence includes any failure to make
a reasonable attempt to comply with the law or maintain adequate
books and records. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax
6 Although petitioner acknowledged that she did not report
income from Prepaid Legal Services, respondent did not attempt to
assert an increased deficiency. Accordingly, we do not modify
the gross receipts that were reported by petitioner and accepted
by respondent.
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Last modified: November 10, 2007