-35-
Rolls Royce. The capital contributions by SSI on behalf of
petitioners are 1982 income to petitioners.
S. Tax Returns
Petitioners are cash basis taxpayers.
1. Petitioners' 1980 Tax Return
On April 15, 1981, petitioners filed for an extension of
time to file their 1980 tax return. Respondent granted to
petitioners an extension to June 15, 1981. Additional extensions
for petitioners' 1980 tax return were neither sought by
petitioners, nor granted by respondent. Petitioners filed their
joint 1980 tax return on September 18, 1981.
On their 1980 tax return, petitioners reported (1) $79,989
gross income and $71,154 net profit from Associates, (2) $19,010
gross income and $39,128 net loss from Robert Iles Computer
Services, and (3) a $13,860 net loss from Robert Iles, et al.
Petitioners reported their total 1980 tax liability as $5,541
($1,283 income tax, $1,471 self-employment tax, and $2,787 tax
from recomputing prior-year investment credit). Below their
signatures, petitioners wrote the following: "This return was
prepared under duress due to summons and it will be amended."
However, petitioners never amended their 1980 tax return.
2. Petitioners' 1981 Tax Return
On April 15, 1982, petitioners filed for an extension of
time to file their 1981 tax return. Respondent granted to
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