Lively v. Commissioner

Richard W. Lively and Veronica Lively filed a Form 1040 for the taxable year 1977 reflecting income of only $7,918. This amount was entered on the line for “business income” rather than on the line for “wages, salaries, tips, and other employee compensation.” With the Form 1040, the Livelys filed Wage and Tax Statements showing that Richard had received $30,-659.65 in wages during 1977. They also filed a Schedule C,1 which, after listing “receipts” of $31,360 and “subtractions” for personal expenses of $23,442, identified “net profit” of $7,918. The Commissioner sent the taxpayers a statutory…