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$31,200.75, and $37,833.89 in 1984, 1985, 1986, and 1987,
respectively.
On April 6, 1994, respondent issued a notice of deficiency to
petitioner. Respondent used the net worth method of income
reconstruction to determine petitioner's taxable income for the
years in issue. For each of these years, respondent determined
that petitioner's net worth, increase in net worth, total net
worth, and personal living expenses were as follows:
01/01/84 12/31/84 12/31/85 12/31/86 12/31/87
Total assets $330,568 $502,423 $570,027 $350,432 $281,967
Total liabilities (53,920)(70,173) (64,598) (51,563) (45,024)
NET WORTH 276,648 432,250 505,429 298,869 236,943
Net worth at
beginning
of year -- (276,648) (432,250) (505,429)(298,869)
Increase in
net worth -- 155,602 73,179 (206,560) (61,926)
Personal
living expenses -- 44,111 46,812 1319,358 136,977
ECONOMIC INCREASE -- 199,713 119,991 112,798 75,051
1 Petitioner's personal living expenses included gifts to his children
of $281,294.86 in 1986 and $104,089.55 in 1987.
Based on these computations, respondent calculated that
petitioner had gross income of $199,713.04, $119,990.50,
$112,798.82, and $75,050.67 for 1984, 1985, 1986, and 1987,
respectively. Based on these amounts, respondent determined that
petitioner was liable for deficiencies of $78,807.11, $41,092.63,
$36,949.80, and $16,621.39 for 1984, 1985, 1986, and 1987,
respectively. The deficiencies included self-employment tax of
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