Melvin J. Laney and Carolyn A. Laney - Page 18

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                  The $564,189.13 amount that petitioners reported as gross                           
            receipts on their 1983 tax return represents the amount that                              
            Laney believed his clients had spent on R.K., both the actual                             
            outlays of his clients and the value of the time of his clients’                          
            personnel.  This amount does not include any amounts that Laney’s                         
            clients paid to him.  The claimed $16,347,250 theft/casualty loss                         
            deduction includes some $480-490 thousand that petitioners had                            
            omitted from gross income over the period 1977 through 1982 and                           
            had spent on R.K.                                                                         
                  Petitioners chose not to carry back their claimed 1983 net                          
            operating loss, but instead to carry it only forward, and                                 
            attached statements to this effect to their 1983 and later tax                            
            returns.                                                                                  
                  Table 2 summarizes information appearing on the first and                           
            second pages of petitioner’s tax returns for 1977 through 1988.                           




















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