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In discussing the last item by telephone, Ms. Cates
told Ms. Ruble that the total expenditures for
Mr. Harrison's Corpus Christi law firm, as reflected in
her journal, amounted to approximately $300,000. Ms. Ruble
used this amount in computing petitioners' 1989 estimated
tax liability. She did not discuss with Ms. Cates the
composition of the amounts in that total, and she failed to
take into account the fact that a substantial portion of
that total consisted of capital expenditures, including
$64,000 for leasehold improvements, $6,982 for reception
room furniture, and $8,000 for office furniture, that were
not fully deductible in 1989.
In August 1990, petitioners' accountants filed, on
their behalf, a Form 2688, Application for Additional
Extension of Time To File U.S. Individual Income Tax
Return, requesting an additional extension of time to file
petitioners' 1989 return. The Form 2688 states that the
extension is needed because petitioners' accountant has an
extremely heavy workload and has been unable to complete
the return.
On or about October 16, 1990, petitioners filed a
joint individual income tax return for 1989 on Form 1040.
They paid $41,915 with the return. This amount consists
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