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incorporated herein by this reference. Petitioners resided in
Freeport, Minnesota, when they petitioned the Court.
Petitioners are brothers. During the years in issue they
were dairy farmers who sold milk to Modern Craftsmen Milk
Association (MCMA), or to MCMA's successors, through Imperial
Investments, Inc. (Imperial).
Petitioners participated with Joan Noske, C.P.A., among
others, in a scheme to understate their Federal income tax
liabilities through purported transfers of farming assets and
operations to Imperial. Ms. Noske prepared petitioners'
individual income tax returns and Imperial's corporate returns.
For 1984 and 1985, Loren Scherping reported on each of his
tax returns that he realized $11,000 a year of sole
proprietorship income. This was income he derived from farming.
For 1986, he reported sole proprietorship income of $11,600,
which was farming income.
For 1984 and 1985, LaVern Scherping reported on each of his
tax returns that he realized $8,000 a year of sole proprietorship
income. This was income he derived from farming. For 1986, he
reported sole proprietorship income of $8,600, which was farming
income.
Respondent determined and reflected in a separate notice of
deficiency for each petitioner that petitioners were required to
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