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Joint Returns
For each of the years at issue, petitioner and Mr. Morris
filed a joint return that Mr. Morris had prepared. They claimed
their children as dependents in the 1987 and 1988 joint returns
and claimed their son as a dependent in their 1989 return.
In the joint returns for the years 1987 through 1989,
petitioner and Mr. Morris reported, inter alia, the following
income (and loss):
1987 1988 1989
Wages, salaries, etc. $41,376.64 $38,101.00 $37,700.00
Taxable interest 2,147.99 2,758.00 5,450.00
Schedule C (447.25) -- --
Schedule D (3,000.00) (3,000.00) (3,000.00)
Schedule E -- 24,929.00 18,987.00
Total income 40,077.38 62,788.0019 59,137.00
The category "Schedule C" reflects the results shown in
Schedule C of the joint return for 1987. Petitioner and Mr.
Morris included in that schedule the $40,000 bonus that Mr.
Morris received from John Kenny Company during that year. That
bonus income was completely offset by deductions that they
claimed in that schedule.
The category "Schedule E" reflects the results shown in the
respective Schedules E of the joint returns for 1988 and 1989.
Petitioner and Mr. Morris included in those schedules the amounts
of ordinary income (or loss) from a trade or business activity
19 The joint return for 1988 incorrectly showed total income of
$62,083.
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