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The IRS mailed Monk notices of deficiency for both years.
Monk timely filed petitions, the cases were consolidated, and
trial was held in Baltimore. Monk was a resident of Maryland
when he filed.
OPINION
The Commissioner claims that Monk’s original position on his
tax returns for 1994 through 2002--i.e., that Chuck’s Place was
his own Schedule C sole proprietorship--was an admission by Monk
and so is the proper way to classify his interest in the bar. In
support, she points out that it is Monk’s name that was stated as
the bar’s owner on the liquor license and lottery paperwork.
Monk was also the only person originally named on the bar’s only
bank account; even now, Maney’s name is on that bank account not
as an owner, but only as someone with signatory authority.
Finally, it was Monk who submitted the bar’s gross income and
losses to the IRS, not Maney. Monk changed his position only
after the audit began.
Each of these points supports the Commissioner’s view that
Monk actually owned Chuck’s Place, although maybe as a joint
venture or partnership with Maney rather than a sole
proprietorship.7 But we look at all the facts together to decide
7 Characterizing any potential ownership interest as a sole
proprietorship would mean classifying Monk and Maney’s
relationship as that of employer/employee. Nothing in the record
supports this.
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Last modified: March 27, 2008