Kerry Kerstetter conducted an accounting and tax preparation business out of his Arkansas home. When preparing his Schedule C for his personal tax return, Kerstetter made a litany of mistakes, among the more egregious of which were:
- Deducting depreciation on his entire home, rather than the portion used exclusively and regularly for business as permitted under Section 280A.
- Deducting all of his personal credit card interest and mortgage interest on Schedule C, rather than on Schedule A or — in the case of the credit card interest — nowhere.
- Deducting pet food as “supplies.”
To make matters worse, Kerstetter failed to file his 2001 and 2003 returns on time. When he did get around to filing them, the returns reflected large net operating loss carryforwards that wiped out his income, but that Kerstetter could not substantiate.
As you might expect, the Tax Court expected more from someone holding themselves out to the public in such an esteemed, trusted position as a tax advisor:
Petitioners’ arguments in this case have not been supported by evidence or by authority. Instead petitioners make assertions based only on their generalized testimony and on petitioner’s claimed years of experience in dealing with the IRS on behalf of clients. Particularly in view of petitioner’s experience, the absence of corroboration of his testimony by organized and reliable records leads us to conclude that petitioners have not carried their burden of proof as to the disputed deductions.