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income reported on his Schedules C in the taxable year that it
was received.
During the years 1983 through 1987, petitioner reported as
income on his Schedules C, in the year that the income was
actually received, amounts paid to him from the partnership for
equipment rentals and property he sold to the partnership. On or
about the date petitioner received it, petitioner’s bookkeeper
entered the $25,000 in management fees paid to petitioner in 1984
in petitioner’s general ledger, as management fees received from
the partnership, and petitioner reported the $25,000 as income on
Schedule C of petitioners’ Federal income tax return for 1984.
With the exception of that $25,000, petitioner did not report as
income the management fees accrued by the partnership during the
years 1983 through 1986 on petitioners’ Federal income tax
returns for those years or on their 1987 return. He did,
however, report on his returns the other income reflected in the
Forms 1099 issued to him during 1987 and 1988 by the partnership.
The management fees accruing pursuant to the compensation
arrangement were not reflected in any of the records petitioner
provided to his accountant, Clifford Abelson, for the purpose of
preparing petitioners’ 1983 through 1986 Federal income tax
returns, and Mr. Abelson was unaware of the accruals during those
years. During 1988, during the preparation of petitioners’ 1987
return, Mr. Abelson came across the Forms 1099 issued to
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Last modified: May 25, 2011