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Betsy’s and Ben’s salaries were reduced to $95,000 and Beatrice’s
salary was reduced to $60,000.
Petitioner and Betsy timely filed joint tax returns for 1983
through 1987. Petitioner timely filed a separate tax return for
1988.20 On January 30, 1990, petitioner, Betsy, and respondent
extended to June 15, 1990, the period for assessment for 1986.
Respondent audited petitioner’s and Betsy’s 1983 joint tax
return sometime before March 1987, and concluded that petitioner
and Betsy had overstated their income for that year by $69,885;
this overstatement resulted in a $34,942 overstatement of
petitioner’s and Betsy’s 1983 tax liability. The resulting Form
4549 (Income Tax Examination Changes) for 1983, agreed to on
March 5, 1987, shows that petitioner and Betsy were entitled to a
$69,885 downward adjustment to income for “Sale of Partnership
Interest”. Petitioner and Betsy reported this item on their 1983
tax return as ordinary income from the sale of “Integrated
Natural Gas Partnership.” Apparently, petitioner and Betsy
received a credit or refund of the $34,942.
20 The tax returns for 1983 through 1987 were filed on or
about Apr. 15 of the appropriate years. The tax return for 1988
was filed on July 3, 1989, which was timely because Berger had
timely filed, on petitioner’s and Betsy’s behalf, an application
for a 4-month automatic extension to Aug. 15, 1989.
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