Dona Elizabeth Conway - Page 5

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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