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On October 9, 2003, respondent received petitioner’s 2001
amended Federal income tax return and an attached Schedule C
which identified petitioner as the sole proprietor of Sam
Transportation. On the Schedule C, petitioner reported gross
receipts of $403,845, total expenses of $536,473, and a net loss
of $132,628. As a result of the net loss, petitioner decreased
his adjusted gross income by $132,628 and reported total tax of
zero.
At some point after petitioner filed his original tax
return, respondent commenced an examination for petitioner’s 2001
tax year. On February 14, 2005, petitioner executed a Form 872,
Consent to Extend the Time to Assess Tax, which extended the time
within which respondent could assess any Federal income tax due
with respect to petitioner’s 2001 tax year to April 15, 2006.
On November 3, 2005, respondent issued petitioner a notice
of deficiency. On the basis of bank deposits, respondent
determined petitioner received Schedule C gross receipts of
$416,903.3 Because petitioner substantiated only $260,111 of
the claimed Schedule C expenses, respondent determined petitioner
was entitled to deduct Schedule C expenses only to the extent
substantiated. Respondent increased petitioner’s total income to
$154,312, determined petitioner was liable for self-employment
3 Respondent concedes that petitioner correctly reported
Schedule C gross receipts of $403,845. See supra note 2.
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Last modified: November 10, 2007