I happened to run across a 11/2010 Tax Court memorandum, Sharon Louise Griffin v. Commissioner, T.C. Memo. 2010-252, and it makes no sense. I don't mean that the opinion makes no sense, but that the taxpayer makes no sense.
Briefly, the years in dispute were 2001-2003, during which the taxpayer reported about $70,000 each year from part-time work as video technician. The returns also included NINE schedules C covering a delivery service, video production, janitorial maintenance service,
computer repair service, handyman service, landscape maintenance service, parking lot maintenance/steam cleaning service, consulting service, and notary/process server service. Those business supposedly grossed almost $2.9 million over those three years, and yet she claimed to have not made a profit. But those labor-intensive businesses had no payroll records and issued no 1099s.
To give you a flavor of the opinion, this if from page 29:
What's weirdest of all is that, not only did she have no records of any expenses (and very little recollection of who she paid for services), but she also had no records of any income. It was all cash, and she never deposited any of it into any bank, so there would have been no way for the IRS to have reconstructed her income if she hadn't reported it.Tax Court wrote:5. Commission Expenses
Griffin claims to have incurred cash-commission expenses. But her vague testimony regarding such payments and her supporting documentation are not credible. She provided summaries at trial with over 800 handwritten “cash receipts” per year as backup documentation. Based on the receipts, she never paid the same person more than once. The payees never signed the receipts, and some of them had very unusual names.[17] Moreover, no contact information for any of the payees was provided. Even if we were to admit this evidence, we wouldn’t believe it.
[Footnote]17 In Griffin’s records, for example, the name “Xander” appeared five times and “Zander” appeared six times. They were presumably different people because each Xander or Zander had a different surname. According to the Commissioner’s investigation, there are very few Xanders or Zanders in the entire state of California--about 85 Xanders and 95 Zanders. Griffin either had an uncanny ability to find Xanders/Zanders, or her cash receipts are unreliable evidence. We do not believe the former possibility.
So what the hell was she doing? Was she really running nine cash-based businesses in which she carefully recorded the money she received without bothering to keep track of who she was receiving money from or paying it to? If not, then why on earth did she report what she reported? Is she daft?
Totally weird.