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Form 1041 claimed a $17,197 loss on its rental of the residence,
which was used to offset the $24,123 of net income from
petitioner's services. Ideal Management's 1992 "Total income" of
$6,926 ($24,123 - $17,197) was reportedly distributed to Clark
during that year.
Respondent analyzed the deposits made during 1992 into the
joint account and the Ideal Management account. The deposits
into the Ideal Management account aggregated $75,553, and the
deposits into the joint account equaled $5,606. Based on her
analysis, in the context of the surrounding facts, respondent
determined that petitioner failed to report self-employment
income of $73,021. Respondent also determined that petitioner
was liable for self-employment tax of $8,961 on this unreported
income. Respondent stated in the notice of deficiency that Ideal
Management was a grantor trust or, alternatively, a sham.
On or about November 3, 1995, respondent filed a Federal tax
lien against petitioner. The lien arose from petitioner's 1990
and 1991 taxable years. Respondent assessed petitioner's
liability for these years on December 12, 1994, and July 3, 1995,
respectively. Petitioner's liability for the assessed amounts
aggregated almost $100,000 on the date of the lien.
OPINION
We must decide whether the income earned by petitioner and
paid to Ideal Management during 1992 was includable in
petitioner's 1992 gross income. Respondent argues that it was,
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