- 5 - Petitioners’ Forms 1040 for 1989, 1990, and 1991 were prepared using the cash basis method of accounting. Prior to December 1993, an examination of petitioners’ returns was commenced by the Internal Revenue Service. In December 1993, petitioners filed a Form 1040X, Amended U.S. Individual Income Tax Return, for 1990. In September 1994, petitioners filed a Form 1040X for 1989 and a second Form 1040X for 1990. The statutory notice of deficiency for 1990 and 1991 was sent to petitioners on September 29, 1994. In December 1994, petitioners filed a third Form 1040X for 1990 and a Form 1040X for 1991. On each of the amended Forms 1040X, petitioners claimed farm losses on Schedule F and recharacterized the interest and tax expenses claimed on Schedule A as farm loss expenses, claimed the standard deduction instead of itemized deductions on Schedule A, and purportedly changed from cash to accrual accounting for farm operations allegedly begun in 1989. They claimed depreciation of unidentified farm equipment in the amount of $3,000 on the amended returns for 1990 and 1991. They then claimed a net operating loss carried forward from 1989 to 1990 and 1991. During the course of the bankruptcy proceeding, petitioners returned to the vendors certain office equipment that had been possessed by Mitchell & Associates pursuant to lease/purchase agreements. Rent and lease expense deductions for office equipment of Mitchell & Associates were claimed on Schedules C for 1990 and 1991 in the amounts of $7,800 and $5,600,Page: Previous 1 2 3 4 5 6 7 8 Next
Last modified: May 25, 2011