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the CFT, as “other income” subject to self-employment tax on the
Castros’ jointly filed Form 1040 for 1995. In respondent’s
notice of deficiency to the Castros, respondent increased the
Castros’ income by the jewelry business’ net profit and decreased
the Castros’ income by the fiduciary fees received.
B. 1996
The CCJT filed a timely Form 1041 for 1996. The CCJT
reported income and expenses allocable to the jewelry business on
Schedule C of its return and also claimed deductions for
fiduciary fees and a distribution to the CFT of all but $197 of
its net income. The CCJT paid income tax of $15 for 1996. In
respondent’s notice of deficiency to the CCJT, respondent
disallowed all of the deductions and increased the jewelry
business’ net profit accordingly.
The CFT filed a timely Form 1041 for 1996. The CFT reported
the income it received from the CCJT on Schedule E to its return.
The CFT also claimed deductions for fiduciary fees, charitable
contributions, and medical, utilities, automobile, meal, travel,
and telephone expenses. The CFT paid income tax of $16 for 1996.
In respondent’s notice of deficiency to the CFT, respondent
disallowed all of the CFT’s deductions.
Petitioner reported the fiduciary fees he received from the
CCJT, and Mrs. Castro reported the fiduciary fees she received
from the CFT, as “other income” subject to self-employment tax on
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