Dennis W. Stark - Page 8



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          point did Lakeview institute legal proceedings or otherwise seek            
          to collect on an indebtedness from William.  Petitioner consulted           
          with an attorney and accountant in connection with the decision             
          not to seek collection.                                                     
               Also notwithstanding the failure to execute the Release                
          Agreement, Lakeview issued a $75,000 check that was dated                   
          December 30, 1992, and made payable to William.  William                    
          deposited the check on April 1, 1993.  The following handwritten            
          legend appears on the back of the check above William's                     
          endorsement:                                                                
               RECEIVED AS PAYMENT OWED FOR � INTEREST OF LAND & BUILDING             
               AT 6835 MIDDLEBELT RD GARDEN CITY[.]                                   
          A Form 1099 reporting income of $75,000 paid to William was                 
          issued by Lakeview for 1992, on which the payment was                       
          characterized as "Nonemployee compensation".  On its 1992 return,           
          Lakeview claimed a $75,000 deduction for "rent".                            
               In 1990, when petitioner and William were 50-percent                   
          shareholders of Lakeview, Lakeview had purchased automobiles for            
          use by William and petitioner.  Lakeview paid $31,878.25 to                 
          purchase an automobile for William's use.  In connection with               
          that purchase, the car dealer issued a check for $9,000 to                  
          Lakeview as payment for a traded-in vehicle, and William                    
          deposited the check into his personal account.                              

          (...continued)                                                              
          amount of "Nonemployee compensation" reported as paid to William            
          Stark by Lakeview, and the $134,116 figure deducted as the                  
          "forgiven" debt on Lakeview's 1992 return.                                  




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