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Petitioners' Joint Return for 1987
Petitioners filed a joint Federal income tax return
for 1987 on Form 1040. They paid $119,585 with the return,
consisting of $117,799 in tax, and a penalty of $1,786
for underpayment of estimated tax. On the Schedule E,
Supplemental Income Schedule, filed with the return,
petitioners reported receiving $445,375 in nonpassive
income from the Houston firm. On the Schedule F, Farm
Income and Expenses, filed with the return, petitioners
reported a net farm profit of $11,595 from the cattle
feeding operation.
Petitioners' Joint Return for 1988
In April 1989, Mr. Whittington and Ms. Ruble prepared
and filed, on petitioners' behalf, a Form 4868, requesting
an automatic extension of time to file petitioners' 1988
return. The Form 4868 states that petitioners' total
income tax liability for 1988 is $1,408, that they had
Federal income tax withheld for the year of $1,408, and
that they had a balance due of zero. The Form W-2, Wage
and Tax Statement, for petitioner's wife reports $1,408 in
Federal income tax withheld. Petitioners' accountants
estimated that petitioners would incur a loss for 1988,
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