Wilburn C. Hall, Jr. - Page 19

                                                   - 19 -                                                      

             Table 4                                                                                           

                   Source and Application of Funds--1982                                                       
             Petitioner   Respondent     Respondent  Court's                                                   
             Sources         Reported     Def. Notice    Brief       Findings                                  

             Wages                 $46,943       $46,943      $46,943     $46,943                              
             Interest income         4,187         4,187        4,187       4,187                              
             Seismic fees              700           700          700         700                              
             Capital gains1          8,207         8,207       20,517      20,517                              
             Rental income          15,026        14,318       15,026      15,026                              
             Farm income             7,538         7,538        7,538       7,538                              
             Royalty income2        14,318        10,329       24,647      24,647                              
             Loans                    –-          32,452       26,500      32,452                              

             Total sources of                                                                                  

             funds              96,919       124,674      146,058     152,010                                  

             Applications                                                                                      

             Expenditures                                                                                      
             reflected on                                                                                      
             Schedule C           318,112       318,112      318,112     318,062                               
             Reduced by:                                                                                       
             depreciation           6,250         6,250        6,250       6,250                               
             write-offs           137,000           –-       137,000     137,000                               
             Net Expenditure                                                                                   
             needing funds           –-         311,862      174,862     174,812                               
             Purchase of assets        –-         132,979      133,008      48,211                             
             Petitioner's draw         –-          23,700       23,700      23,700                             
                                                                                                              
             Total application                                                                                 
             of funds              –-         489,541      331,570     246,723                                 
             Understatement of                                                                                 
             income                                                                                            
             (applications                                                                                     
             minus sources)          –-         343,867      185,512      94,713                               
             1  On his 1982 tax return, petitioner reported $8,207 of capital gain on line 13 of               
             Form 1040. Although he attached a Schedule D to the Form 1040, petitioner did not                 
             provide any underlying amounts on the Schedule D. Sec. 1202(a) as in effect for 1982              
             allowed a deduction from gross income of 60 percent of the amount of an individual's              
             net capital gain, but not short-term capital gain. Sec. 1222. By the time of the                  
             trial, and on brief, respondent evidently assumed that all of the reported $8,207                 
             was net capital gain, after the 60-percent deduction, notwithstanding that                        
             petitioner showed the $8,207 on the Schedule D as short-term capital gain. Burns                  
             testified that "I divided the $8,207 by 40 percent to back into the $20,517 figure                
             to give Mr. Hall the benefit of that source of income as a capital gain item which-               
             would be the full amount." Implicit in respondent's determination in the notice of                
             deficiency is the determination that petitioner had no tax bases in what he sold;                 
             i.e., that his gains amounted to his total receipts from the sales of capital                     
             assets.                                                                                           
             2  See infra, text following note 9 reference, for a discussion of respondent's                   
             concession as to this component of the source and application of funds method.                    






Page:  Previous  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  Next

Last modified: May 25, 2011