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of income on DPP’s attached Schedules K, Partners’ Shares of
Income, Credits, Deductions, Etc., were completed with the word
“consulting”. DPP also deducted from its income “commissions”
paid to B. Mayer Zeiler of $75,000, $75,000, and $400,000 for the
years 1992, 1993, and 1994, respectively. B. Mayer Zeiler also
continued to receive a salary from DPC.
The individual partners reported their distributive shares
of DPP’s income on their Forms 1040, U.S. Individual Income Tax
Return, and accompanying Schedules E, Supplemental Income and
Loss. The amounts were reflected as income or loss from
partnerships but were not included on the partners’ Schedules B,
Interest and Dividend Income.
For the 1991 year, the income was shown as nonpassive. The
description of the nonpassive activity given in the returns of
David Deitsch, Joseph Deitsch, and Joshua Sandman is
“consulting”, and the amounts were designated as self-employment
earnings on the returns of Joseph Deitsch, Joshua Sandman, and
Jacob Pinson. In 1992, David Deitsch again reported his
distributive share as nonpassive income, this time with the
description “trade or business--material participation”. The
other partners categorized their 1992 DPP income as passive, and
in subsequent years all partners, except B. Mayer Zeiler,
utilized the passive designation. They continued, however, to
label the income as self-employment earnings in the following
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