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partnership was self-employment income, although petitioners did
not pay any self-employment tax for that year.
Some of the payments paid to petitioner in the years 1987
through 1989 were paid by checks issued on the law partnership's
North Dakota and Minnesota trust accounts. Payments reflected in
the North Dakota and Minnesota trust account ledgers indicate
that they relate to specific casework, and many list the purpose
of the check to petitioner as a payment for fees. Some checks
issued to petitioner in 1987 and 1989 bear a notation stating
"fees" or indicate that they were payable in connection with a
specific individual. All of the 10-percent payments to
petitioner from the law partnership were designated as fees on
the partnership books.
The property located at 219 South Third Street, Grand Forks,
North Dakota, was purchased by petitioner, Mr. Moosbrugger, and
Mr. Murray on October 7, 1971, for $56,000. The legal
description of the property conveyed was the westerly or front
140 feet of lot 14 in block 32, in Grand Forks, North Dakota.
The purchasers and each of their spouses executed a mortgage in
favor of the First National Bank of Grand Forks (First National
Bank) on April 13, 1972, on the Third Street Property, to secure
a promissory note in the principal amount of $56,000. This
mortgage was satisfied on January 9, 1973. The property was
purchased to be used as offices for the law partnership, and it
was used for this purpose (or by the law practice when the
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