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on Schedules C, Profit or Loss From Business, to their 1992 and
1993 Forms 1040, U.S. Individual Income Tax Returns. Petitioners
showed as an offsetting expense (and deducted) on those
Schedules C for 1992 and 1993 the amounts of $119,488 and
$202,404, respectively (the 1992 and 1993 reported loan amounts).
Petitioners, thus, reported nonemployee compensation received
from IMA for 1992 and 1993 in the amounts of $102,816 and
$117,361, respectively (the 1992 and 1993 reported compensation).
Petitioner’s Calculations
Petitioner calculated the 1992 and 1993 reported loan
amounts and the 1992 and 1993 reported compensation from the
Forms 1099 and statements received from IMA of commissions earned
for each of 1992 and 1993 (the IMA statements). For each year,
petitioner subtracted the amount shown on the pertinent IMA
statement from the year’s payments (the 1992 and 1993 payments,
respectively), the difference being the year's reported loan
amounts (1992 and 1993 reported loan amounts, respectively). On
the returns, petitioners subtracted the 1992 and 1993 reported
loan amounts from the 1992 and 1993 payments, which resulted in
the 1992 and 1993 reported compensation.
Respondent’s Adjustments
Respondent disallowed petitioners' deductions for the 1992
and 1993 reported loan amounts.
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