James R. Palmer and Linda D. Palmer - Page 20




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        invoices 0016 through 0019 within 30 days after Olin Ordnance                 
        first received each such invoice during 1995 was that Mr. Palmer              
        did not want Olin Ordnance to make any such payment to him during             
        that year.                                                                    
             At all times during the performance of the Marion plant/                 
        Palmer consulting agreement, both before and after the execution              
        of the July 1995 amendment, Olin Ordnance was ready, willing, and             
        able to pay Mr. Palmer the amount that it owed to him with respect            
        to each of his approved monthly invoices within 30 days after it              
        first received each such invoice.                                             
             Olin Ordnance issued Form 1099-MISC (Form 1099), Miscella-               
        neous Income, to Mr. Palmer, which showed that Mr. Palmer received            
        $52,894.31 of nonemployee compensation from Olin Ordnance during              
        1995.  The $52,894.31 amount reported by Olin Ordnance in Form                
        1099 equals the total amount of the payments that Olin Ordnance               
        made to Mr. Palmer during 1995 with respect to his approved                   
        monthly invoices 0008 through 0010, which included $5,100 of                  
        Loomis residence monthly payments.10                                          
             Petitioners, cash basis taxpayers, filed a joint Form 1040,              
        U.S. Individual Income Tax Return (joint return), for the year at             
        issue.  In Schedule E, Supplemental Income and Loss, of the joint             


               10There is one cent difference between the amount of                   
          nonemployee compensation reported by Olin Ordnance in Form 1099             
          and the total amount that it paid to Mr. Palmer with respect to             
          his approved monthly invoices 0008 through 0010. For convenience,           
          we shall ignore that difference.                                            





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