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Petitioners’ 1991 Return
Petitioners claimed a net operating loss carryover of
$4,755,114 related to the claimed bad debt loss in 1989. The
return was signed by Mr. Johnson as preparer.
a. Legal Fees
Petitioners claimed a deduction of $30,025 for legal fees
and expenses allegedly paid to Fariborz during 1991. Petitioners
provided documents evidencing: (1) A transfer from petitioner to
Fariborz’s Iranian bank account of $25,000 ($25,040 with fees)
dated May 25, 1991; and (2) two cashier’s checks to the Melli
Bank of Iran, one for $10,000 dated May 21, 1991, and the other
for $15,000 dated May 23, 1991.9
Petitioners did not provide any bills or invoices to detail
what these amounts were used to pay.
b. Filing of the 1991 Return
Petitioners were granted extensions to file their return on
October 15, 1992. Petitioners signed their return on October 15,
1992, and the return is stamped “Received” by the IRS on
October 22, 1992. Petitioners provided a “Domestic Return
Receipt” which shows that the IRS received the return on
9 Also provided is a receipt from Wells Fargo Bank showing
that Huntington Harbor sent a cashier’s check to Melli Bank of
Iran and was charged $5,025 on Apr. 15. It is not clear from the
document whether the date is 1990 or 1991, and petitioners could
not recall the actual year.
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