- 5 -
explained to petitioner that the amounts of the loan guarantees
he had furnished in connection with the motel and restaurant
acquisitions were properly credited to his basis and amount at
risk and would absorb the deductions.
For each of the years at issue, petitioner also sustained
net losses from his securities trading. Leuschner advised
petitioner that his securities trading was substantial enough
to constitute a trade or business entitling him to deduct his
trading losses in full on Schedule C. On the basis of similar
advice that he had received from other accountants, in prior
years petitioner had reported his trading losses as ordinary
losses on Schedule C rather than capital losses on Schedule D
depending on the level of his trading activity during the year.
Preparation of petitioners' return for 1985 was delayed by
an Internal Revenue Service audit of one of the entities in which
petitioner held an interest, a limited partnership called
Barrister Equipment Associates (or Trust). It was Leuschner's
practice to advise his clients not to file a return until it
could be filed on the basis of complete and accurate information.
In his opinion, the alternative strategy of filing a timely but
incorrect return and subsequently amending it was unwise, because
it tended to expose the client to a greater risk of audit.
Moreover, he determined from the available information that
petitioners would have no tax liability for 1985 owing to sizable
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011