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this reference. Petitioners resided in River Falls, Wisconsin,
when they petitioned the Court. They filed a joint 1994 Federal
income tax return which was prepared by a certified public
accountant (the C.P.A.). Petitioners presented the C.P.A. with
all relevant information to prepare the return, and he prepared
the return based on his understanding of the tax law. As of the
time that the C.P.A. prepared the return, he had been practicing
accountancy as a C.P.A. for approximately 20 years, and he had
performed work for petitioners, including preparing their
individual and business tax returns, for at least 16 years.
Petitioners rely on the C.P.A. for business and tax advice.
Stephen Schwalbach (Dr. Schwalbach) practices dentistry in
River Falls. He is employed full time by Associated Dentists of
River Falls, f.k.a. River Falls Dental Association (Associated
Dentists), a personal service corporation that he owns equally
with another dentist named Timothy Knotek. Associated Dentists'
business is based in a building (the River Falls building) owned
by petitioners and let to Associated Dentists under a lease dated
January 1, 1992.
Petitioners' 1994 Schedule E, Supplemental Income and Loss,
reported net income of $50,556 on the rental of the River Falls
building to Associated Dentists. This schedule also reported
that petitioners had realized a $1,670 loss renting a commercial
building sited in Hudson, Wisconsin, and that they had realized
$877 of net income renting a residential house sited in River
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