Frederick M. and Cheryl A. Prouty - Page 3




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          was another attached Form W-2 for Mr. Prouty from "Theatrical &             
          TV Motion Picture Special Payment Fund" (TMPSPF) in the amount of           
          $10.40.                                                                     
               Attached to the return were two Forms W-2 in the name of               
          Cheryl Prouty (petitioner).  One was from "Sinclair Television of           
          Nashville, Inc." indicating wages, tips and other compensation of           
          $28,429.47, and the other was from "Lambert Broadcasting of                 
          Nashville" (Lambert) indicating $26,259.82.  On neither form was            
          box 15 checked to indicate that petitioner was a "statutory                 
          employee".                                                                  
               Petitioners filed with their return two Schedules C, Profit            
          or Loss From Business.  No Schedule C was filed for Mr. Prouty,             
          both were for petitioner.  One was for her multilevel sales                 
          representative business, and one was for the business of "TV                
          Sales Executive" under the business name, "WZTV & WNAB".  The               
          latter Schedule C reported business income of $61,001, expenses             
          of $7,904, and net profit of $53,097.                                       
               The Internal Revenue Service Center (Service Center) in                
          Ogden, Utah, sent petitioners a form notice CP-2000 dated October           
          31, 2000, proposing changes to their 1998 income tax return.                
          Among other items, the Internal Revenue Service (IRS) proposed an           
          increase in taxable wages of $7,914, an amount that comports with           
          the sum of the disallowance of petitioner's TV Sales Executive              
          Schedule C deduction of $7,904 and the Form W-2 in the name of              






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