income tax return for 1983. The Schedule C revealed that the
proprietorship's main business activity was "investments" and
reported negative gross income in the amount of $7,455 in respect
of "Frozen Confection of Ohio 1983-1". The Schedule C claimed
total deductions in the amount $14,576. Of the $14,576 claimed
deductions, at least $14,168 were claimed in respect of the Saxon
investment. In this regard, petitioners claimed a $13,500
deduction as an equipment lease expense and $668 for management
expenses. A net loss in the amount of $22,031 was then claimed
on the Schedule C and was used to dramatically reduce income
reported from other sources. Petitioners ultimately reported
negative taxable income in the amount of $5,702 and claimed a
refund of all of the income tax withheld from their compensation.
Petitioner and Mr. Woodward also attached Form 3468,
Computation of Investment Credit, to their income tax return for
1983. In Part II of Form 3468, petitioner and Mr. Woodward
claimed an unadjusted basis in their investment property in the
amount of $205,000.5 Based upon this value, petitioners claimed
an investment credit in the amount of $20,500. Of this amount,
petitioners used $0 in 1983, and carried back $10,180, $9,620,
and $700 to 1980, 1981, and 1982, respectively.
3. The Application for Tentative Refunds
In or about early March 1984, petitioner and Mr. Woodward
filed Form 1045, Application For Tentative Refund. The Form 1045
5 The business name of the investment was not disclosed.
However, the Form 3468 relates to Saxon.
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