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Petitioners retained an accounting firm named Thompson & Co.
to perform accounting work for 1987 and 1988, and petitioners
provided Thompson & Co. with all necessary information to prepare
petitioners' 1987 and 1988 Federal income tax returns. On
August 15, 1988, Thompson & Co. prepared a 1987 Federal income
tax return for petitioners listing $187,231 as their adjusted
gross income. Petitioners refused to file this return, believing
it to be incorrect because it understated their income. Later,
Thompson & Co., prepared a 1988 return for petitioners listing
their income at $217,231. Petitioners refused to file this
return, again believing the reported income was understated.
Thompson & Co. calculated petitioners' 1988 tax at $8,997 per
quarter and advised them to pay estimated taxes of $35,988.
During the summer of 1989, petitioners dismissed Thompson & Co.,
claiming that the firm underreported petitioners' income. In or
about June 1989, petitioners hired another accounting firm named
Frumkin & Lukin to provide accounting services to Dr. Wilkinson's
medical practice and to prepare petitioners' Federal income tax
returns for the years in issue.
Petitioners filed their 1988 and 1989 Federal income tax
returns, prepared by Frumkin & Lukin, on November 6, 1992.
Petitioners reported that Dr. Wilkinson's medical practice
realized gross income of $708,220 during 1988 and $792,444 during
1989, and that after subtracting payments of withholding and
estimated tax, petitioners owed taxes in the amounts of $133,437
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