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Petitioner’s mother had a long illness in 1994 and 1995.
Petitioner frequently took her to doctor’s appointments and
picked up her medications. He also met with contractors who
repaired her house, and he sold her car. She was hospitalized
several times in 1995, and petitioner stayed overnight with her
in the hospital once. Petitioner’s mother died on March 28,
1996. Petitioner was the executor of his mother’s estate.
Petitioner’s sister, Lorna Gail (Gail), moved to San Antonio
in 1994 to help him care for their mother. However, Gail was
seriously injured in a car accident on September 7, 1994, and
could not help petitioner care for their mother.
B. Petitioners’ 1994 and 1995 Income Tax Returns
Petitioner kept detailed records of his business receipts
and deductions for 1994 and 1995, his business activities, and
how he spent his time away from the business in 1994 and 1995.
He had records that showed he had gross receipts from his
business of $134,351.21 in 1994. However, he did not rely on
these records when he prepared his 1994 return.
Petitioners received a Form 1099-C which showed that they
had cancellation of indebtedness income of $18,067 for 1994.
They did not report this amount in income on their 1994 return.
Petitioners reported income from petitioner’s architectural
services on a Schedule C that they attached to their 1994 return.
On it, petitioners reported gross receipts of $114,351.21 and a
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