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business license in his name. Petitioner did not have a business
name, and he did not have a business telephone. Petitioner did
not belong to any trade association, and he did not have any
employees. Petitioner did not advertise the Property for sale;
all advertising was done by a real estate agent with whom
petitioner listed the Property for sale.
Petitioner filed a 1992 Form 1040, U.S. Individual Income
Tax Return, using the filing status of "Single". The return was
prepared by petitioner's long-time tax preparer, a certified
public accountant (C.P.A.), and it listed petitioner's occupation
as "investments". Petitioner's 1992 gross income was $186,003,
exclusive of a $3,000 capital loss and a $71,504 loss that he
reported on the sale of the Property. Most of petitioner's gross
income was from interest, dividends, and petitioner's involvement
in numerous partnerships.
Petitioner reported the $71,504 loss on his 1992 Schedule C,
Profit or Loss From Business (Sole Proprietorship), as an
ordinary loss: $71,304 of this amount was due to the loss on the
sale of the Property and $200 was attributable to "Legal and
professional fees". The Schedule C stated that petitioner was a
"developer", that he had operated his business for 5 months
during 1992, and that his business was not in operation at the
end of 1992. Petitioner and his C.P.A. discussed petitioner's
financial data before the C.P.A. prepared petitioner's return,
and they discussed the facts behind petitioner's involvement in
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