- 27 -
agreement. Newtowne was never compensated for its services as a
general contractor, which are estimated at $100,000. Riat
received $5,000 from petitioner for the architectural services he
provided that had a value of approximately $35,000. Petitioner
failed to report on his 1984 return the $30,000 difference
between the value of Riat's services, $35,000, and the amount he
actually paid, $5,000. Newtowne's cost of constructing the home,
not taking into account any credits for petitioner's consulting
services, was $361,055. The cost of constructing petitioner's
home and the value of the contractor services provided by
Newtowne were not reported as income on petitioner's 1984 return.
As indicated earlier, Savko was the excavation and site
preparation firm that performed most of the excavation work for
petitioner. Petitioner obtained a construction loan account for
four of his projects at Chicago Title Insurance Co. (Chicago
Title). Specific amounts of construction loan funds in the
Chicago Title account were budgeted to cover specific costs.
During the construction of petitioner's home, petitioner drew on
this construction loan account to pay Newtowne and Savko for
their services. Savko endorsed the checks it received from
Chicago Title to Newtowne in payment of the costs associated with
the construction of petitioner's home. For example, on April 13,
Page: Previous 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 NextLast modified: May 25, 2011