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Mr. Gaskins 1990 1991
Share of partnership income $439,316 $742,593
Self-employment tax deduction (1,635) (4,971)
Deduction for exemptions 8,600
Total adjustments 437,681 746,222
Reported income 27,753 42,626
Adjusted income 465,434 788,848
OPINION
Unreported Sales
The first issue for decision is whether unreported
income in the amount of $888,528 in 1990 and $1,054,576 in
1991 should be included in Beaufort Leaf's gross receipts,
as determined by respondent. If Beaufort Leaf's gross
receipts are increased as determined by respondent, then a
one-third distributive share of the additional partnership
income attributable to this adjustment is includable in the
income of each petitioner. See sec. 702(a); United States
v. Basye, 410 U.S. 441, 453-454 (1973).
Petitioners advance two arguments in support of their
position that respondent erred by increasing Beaufort
Leaf's gross receipts. First, they argue that the sales
that are the source of the unreported income were outside
the scope of the business of Beaufort Leaf. Accordingly,
petitioners argue that the unreported income is the income
of Mr. Roberts, not the income of Beaufort Leaf, and there
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