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From the time petitioner and her husband divorced in 1986
until petitioner sold the home in 1994 for $375,000, petitioner
maintained records that establish the nature and cost of capital
improvements made to the home.
In 1994, petitioner paid a $10,000 consulting fee relating
to a family business plan and to the acquisition and the sale of
personal property.
In 1994, petitioner received $5,149 as a distribution from
an individual retirement account (IRA) that petitioner maintained
at Great-West Life & Annuity Insurance Co. (Great-West). Great-
West mailed to petitioner and to respondent a Form 1099-R
indicating that $895 of the $5,149 distribution represented
taxable income to petitioner.
1994 Tax Return and Respondent's Audit
On her 1994 Federal income tax return, petitioner did not
report any taxable income relating to the transfer of a portion
of the funds invested in the Fortis annuity contract into the
Equitable annuity contract.
Also on her 1994 Federal income tax return, with regard to
sale of her home petitioner reported a $375,000 selling price, a
tax basis in the home of $335,492, and a taxable gain of $2,578.
Petitioner claimed as miscellaneous itemized deductions $13,250,
consisting of $10,000 for a consulting fee, $2,500 for investment
loss, and $750 for legal fees, and petitioner reported as taxable
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Last modified: May 25, 2011