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Petitioners reported wages of $4,558 consisting of $950 paid
to Mrs. Soledad Smith (Mrs. Smith) by Heritage Flamingo
Apartments and $3,608.26 paid to Mr. Smith (petitioner) by
Alameda Newspapers, Inc. On line 12 (business income) of Form
1040, petitioners reported $16,147. They did not attach a
Schedule C as required, nor did they claim any deductions or cost
of goods sold.
Petitioner also received nonemployee compensation from the
Alameda Newspaper Group in the amount of $183,585 during 1993,
which petitioners failed to report. Neither did they deduct any
expenses connected with this sum.
A statutory notice of deficiency was sent to petitioners on
October 1, 1996. On June 26, 1997, they attempted to file an
amended income tax return, Form 1040X, on which they reported the
$183,585 and claimed deductions totaling $178,636.
Although requested to do so, petitioners did not meet with
respondent or present any substantiation for the claimed
deductions until January 26, 1998, 6 days before the beginning of
the trial session on which this case was scheduled. The Court’s
standing pre-trial order (which was served on petitioners by the
Court on August 26, 1997, and a copy of which respondent had sent
them when requesting an earlier meeting) stated: “Any documents
or materials which a party expects to utilize in the event of
trial * * *, but which are not stipulated, shall be identified in
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