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the newspaper in 1992 but repurchased it in December 1994,
operating it as a sole proprietorship during each subject year.
Among other things, the newspaper published stories on news,
weather, and sports. The newspaper also accepted and published
advertisements. During 1997, the newspaper was 50 cents per
single copy, with a reduced price in the case of annual
subscribers. The annual subscription rate was $16.50 in 1995,
$20 in 1996, and $26 in 1997, and the total number of paid
subscribers in those respective years was 1,505, 1,450, and
1,500. For 1997, the newspaper’s classified advertising rate
(which was payable in advance absent other acceptable credit
arrangements) was 25 cents per word for a private party
advertisement and 50 cents per word for a commercially placed
advertisement. During 1997, its advertising rate (other than in
the classified section) was $4.50 per column square inch, with a
20-percent discount for runs of at least four consecutive issues.
Petitioners have never filed a 1994, 1995, 1996, or 1997
Federal income tax return. On September 2, 1997, respondent’s
revenue agent (agent) wrote to Mr. Burnett requesting that he
meet with her at a stated time and place on September 12, 1997,
in order to determine his 1993 through 1996 Federal income tax
liability. The letter stated that he should bring with him to
the meeting all of his business records and certain of his
personal records; the letter identified the referenced business
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