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the requirement that tax return preparers are to keep copies of
prepared returns or a list of clients. Petitioners’ accounting
practice specialized in the field of taxation.
M&M’s 1989 U.S. Partnership Return of Income (Form 1065),
which McDonald prepared, reflected gross receipts of $24,590 and
a single deduction of $24,590 attributable to “Guaranteed
payments to partners”. Other than on the Schedules K-1, no other
information was reflected on the partnership return (i.e., the
balance sheet was left blank, and the Schedule M for
reconciliation of partners’ capital was marked “NA”). The
Schedules K-1 revealed that Maynard and McDonald were 50-50
partners, but that McDonald was allocated $3,457 of the
guaranteed payments to partners, and the remaining $21,133 was
allocated to Maynard. McDonald's $3,457 share of M&M’s 1989
income was based on Maynard’s estimate. Petitioners did not
maintain records of the number of hours worked or number of
returns prepared by each partner.
M&M’s returns for the fiscal year ended September 30, 1987,
the period October 1 through December 31, 1987, and the 1988
calendar year each reflect that petitioners shared profits and
losses in a 50-50 ratio. These three returns reflect income and
guaranteed payments to petitioners, as follows:
Taxable Period Income McDonald Maynard
FYE 9/30/87 $5,520 $3,670 $1,850
10/01 to 12/31/87 750 500 250
Calendar 1988 24,469 3,711 20,758
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