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In 1979, Mr. Heitzman had $145,311 of business income
related to his role in the development of a large condominium
project by DMA Heitzman. Additionally, Mr. Heitzman earned
$33,948 in compensation from TSI Corporation. The 1979 joint
income tax return claimed deductions of $110,170 derived from
Stonehurst.
On June 14, 1980, petitioner and Mr. Heitzman filed their
joint return after obtaining an appropriate extension.
5. Events Subsequent to the Filing of the 1979 Return
On June 22, 1981, Mr. Heitzman and petitioner gave a power
of attorney to two accountants employed by Alexander Grant to
represent them before the Service for tax year 1979.
In June 1982, petitioner and Mr. Heitzman separated, and he
moved to Phoenix, Arizona. On April 11, 1983, the Family Court
of the First Circuit of Hawaii granted a final divorce decree to
petitioner and Mr. Heitzman. The “Agreement Incident to and in
Contemplation of Divorce”, dated March 11, 1983, provided that
Mr. Heitzman would indemnify petitioner for all deficiencies in
State and Federal income tax arising from income tax returns that
they filed jointly during their marriage, specifically mentioning
a $1,281 assessment by the State of Hawaii for 1979. The
agreement also entitled Mr. Heitzman to any refunds due from
those taxable years.
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