- 18 -
respectively. This alleged additional income is based primarily on
the unexplained deposits into petitioner's bank accounts, the alleged
value of the stock of 2618 Inc that petitioner received in 1988, and
the alleged discharge of indebtedness income relating to petitioner’s
relief from liability as guarantor of the $705,000 TexCommBk loan.
In an amended answer for 1988, respondent asserted that $91,668
in additional flow-through income from 2618 Inc should be taxable to
petitioner on the grounds that 2618 Inc was an S corporation and the
$91,668 was improperly deducted on 2618 Inc's Federal income tax
return as legal fees.
The following schedules reflect the deductions as claimed on
petitioner's 1987 and 1988 Federal income tax returns and the amount
thereof allowed and disallowed by respondent in respondent’s notices
of deficiency:
1987 Business Deductions
Amount Claimed Amount Allowed Amount Disallowed
Item On Return By Respondent By Respondent
Temporaries and Steno$ 8,712 -0- $ 8,712
Materials and Supply 3,710 -0- 3,710
Depositions, Court Costs 4,779 -0- 4,779
Bad Debts 22,826 -0- 22,826
Dues and Publications 623 $ 623 -0-
Insurance 6,933 6,933 -0-
Interest 149,137 -0- 149,137
Rent and Utilities 24,317 -0- 24,317
Taxes 2,861 -0- 2,861
Travel, Meals, etc. 3,212 -0- 3,212
Telephone 3,564 3,564 -0-
Parking 3,248 -0- 3,248
Auto & Plane 14,051 -0- 14,051
Error Correction (5) -0- (5)
Total $247,968 $11,120 $236,848
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