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Petitioner paid $8,126 of interest to First Hanover Bank in
1990.
G. Petitioners' Income Tax Returns
Johnson Sheffield (Sheffield), a certified public
accountant, prepared petitioners' income tax returns from 1981
through the years in issue. Petitioner prepared and gave
Sheffield a summary of petitioners' income and expenses for 1990
and 1991. Sheffield prepared petitioners' returns based on
petitioner's summary. In his summary, petitioner treated
interest paid from each account as if it were an expense of that
account. Sheffield did not know that petitioner moved assets and
money between his real estate and farming operations.
Sheffield did not prepare McCullen Real Estate's income tax
returns (Forms 1120) for 1990 and 1991. Petitioners concede that
they and McCullen Real Estate deducted some of the same interest
items.
On their income tax returns, petitioners reported wages and
salaries of $61,991 in 1990 and $31,220 in 1991, and farm income
of $12,959 in 1990 and $26,151 in 1991. On their Schedules C,
they reported having gross receipts of $14,675 in 1990 and $9,921
in 1991 from appraisals. They reported no income or advertising
expenses relating to the sale of real property in the years in
issue. Petitioners did not report that they had any inventory on
Schedule C of their returns for the years in issue.
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