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During the years in issue, petitioners, as sole proprietors,
owned and operated an apartment rental business in the Salt Lake
City metropolitan area. Petitioners owned seven apartment
complexes consisting of a total of 482 rental units. Petitioners
generally shared responsibility for operating the apartment
rental business and for maintaining and managing the apartments.
Petitioners did not keep formal books and records with
regard to their apartment rental business, nor did petitioners
hire a bookkeeper or accountant to maintain any books and
records.
The only records that petitioners maintained of income
relating to their apartment rental business consisted of reports
from apartment managers. The only records that petitioners
maintained of expenses relating to their apartment rental
business consisted of canceled checks and copies of bills.
Apparently, petitioners maintained no journals or ledgers
relating to their apartment rental business.
On each of March 4, September 29, September 30, and
December 30, 1983, petitioners purchased from various banks a
certificate of deposit, each in the amount of $100,000.
For 1982 and 1983, petitioners prepared for their income tax
return preparer handwritten summaries with respect to rental
income and expenses relating to petitioners' apartment rental
business. On the summary sheets, petitioners' rental income and
most expenses for each year were indicated using the seven
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