Robert J. Dwyer and Catherine Dwyer - Page 3

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               Sometime in 1989, petitioner organized Hampton Partners, of            
          which he was the sole general partner and one of three limited              
          partners.  The three limited partners contributed a total of                
          $1,750,000 to Hampton Partners, with petitioner contributing                
               Hampton Partners was formed with the objective that                    
          petitioner would use the contributed capital to generate profits            
          in the stock market.  During the first six months of 1989                   
          petitioner made numerous stock trades that generated large                  
          profits.  However, in the latter part of the year the partnership           
          lost a substantial amount in a trade involving stock of United              
          Airlines.  A dispute then arose among the partners, resulting in            
          lawsuit's being filed involving claims by the other partners                
          against petitioner, and a counterclaim by him against them.                 
               Petitioner repaid the other partners, against the advice of            
          his accountant, in the way he thought the money should go back,             
          but the partners were not satisfied.  Petitioner had never been             
          sued before, and he found the litigation to be very stressful and           
          career threatening.                                                         
               In October, 1989, petitioner withdrew $208,802 from his                
          individual retirement account (IRA), out of which amount he                 
          placed $200,000 in his own brokerage account.  The $208,802 was             
          reported as a taxable distribution on petitioners' 1989 Form                

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