Marcus Wayne and Judity Caroline Ramsey - Page 4

                                         -4-                                          
               Following termination as president of Cal-American, petitioner         
          provided consulting services to Arrowhead General Insurance Agency          
          (Arrowhead).  Arrowhead issued petitioner a 1989 Form W-2,                  
          reflecting $74,503.25 in wages and $8,041 in Federal and $3,956.31          
          in State income taxes withheld.                                             
               Individual Retirement Account                                          
               In February 1989, an individual retirement account, account            
          No. 063-19555-6, was established on petitioner’s behalf at Security         
          Pacific National Bank.  The account was classified as a “SEP”, and          
          Cal-American was the named employer.  Petitioner deposited $11,250          
          into the account at that time. Petitioners claim that petitioner            
          received the $11,250 from Westech, in addition to his wage and              
          severance payments.  Petitioners did not include the $11,250 in             
          income for 1989.                                                            
               On their 1989 tax return, petitioners claimed a $23,822.36             
          deduction for payments made to a “self-employed SEP”, which                 
          respondent disallowed.    The  record  does  not  indicate  how             
          petitioners determined the $23,822.36.                                      
















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