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represents management fees in the amount of $25,000 and other
income in the amount of $17,202. The other income included
$6,400 of equipment rental fees which accrued in 1983, equipment
rental fees earned in 1984, and miscellaneous reimbursements.
The Form 1099 for 1985 was in the amount of $12,000, representing
payment of equipment rental fees for that year. During 1988, the
partnership issued to petitioner, and sent to the Internal
Revenue Service, a 1987 Form 1099 reflecting $190,000 of
nonemployee compensation.
The accrued management fees were not reported on Schedules
K-1 “Partner’s Share of Income, Credits, Deductions, etc.,” as
guaranteed payments to petitioner or otherwise reported to
petitioner on IRS informational forms as taxable income during
any of the years 1983 through 1986. The management fees accrued
were not reported on a 1987 Schedule K-1 “Partner’s Share of
Income, Credits, Deductions, etc.,” as guaranteed payments to
petitioner. Scott Beane, the accountant who prepared the
partnership’s returns and Schedules K-1 for 1986 and 1987, did
not treat the management fees as payments to petitioner because
he assumed that they accrued to a corporation owned by petitioner
and not to him personally. The partnership’s books, however,
indicate that the amounts accrued to petitioner accrued to him
personally and not to an entity related to him. Neither
petitioner nor Mr. White advised any of the persons who kept the
partnership’s books or prepared its tax returns that the
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