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contractor's license for the floor installation work completed by
petitioner during 1992 was in petitioner's name only.
Petitioner and Sheila Webb (Webb), his friend and long-time
roommate, lived in San Diego in 1992 at a house (the residence)
which petitioner's father had transferred to them in 1984. Webb
wrote Ideal Management monthly checks of $500 for petitioner's
"rent" of the residence during that year, drawable on an account
(the joint account) held jointly with petitioner, and the checks
were deposited into an account of Ideal Management (the Ideal
Management account) over which petitioner and Webb had signature
authority. Ideal Management used petitioner's "rent", as well as
the money received from petitioner's services, to pay the
residence's property taxes, mortgage, and other expenses. Ideal
Management also used these moneys to pay the expenses that
petitioner purportedly incurred installing floors.
Ideal Management's 1992 tax return, Form 1041 (U.S.
Fiduciary Income Tax Return), reported depreciation for the
residence and assets that petitioner had originally transferred
to Ideal Management.3 Ideal Management's 1992 Form 1041 also
claimed deductions (e.g., mortgage, insurance, repairs,
utilities) totaling $17,788 for the residence and $40,503 of
expenses (including $18,318 for the cost of goods sold) connected
with petitioner's floor installation. Ideal Management's 1992
3 Ideal Management began depreciating the residence in 1990,
claiming a basis therein of $135,000.
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Last modified: May 25, 2011