- 3 - assets relating to 2001 and 2002. In addition, Ms. Miller used a bank deposits analysis to determine petitioners’ unreported income. On December 6, 2004, respondent issued petitioners a notice of deficiency relating to 2001 and 2002. In the notice of deficiency, respondent determined that petitioners were not entitled to portions of the deductions claimed on their returns, had failed to report gross receipts income, had improperly calculated cost of goods sold, and were liable for section 6662(a) accuracy-related penalties. On March 11, 2005, petitioners, while residing in Colorado, filed their petition with the Court. OPINION Petitioners contend that they are entitled to the Schedule C deductions relating to 2001 and 2002 for Don Osborne Enterprises. Section 162(a) allows as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Petitioners must maintain sufficient records to substantiate the deductions. See sec. 6001; sec. 1.6001-1(a), Income Tax Regs. At trial, petitioners produced canceled checks, credit card statements, insurance records, and other documentary evidence that respondent had previously taken into account in thePage: Previous 1 2 3 4 5 NextLast modified: March 27, 2008