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organized in order to encourage him to keep better records, so as
to avoid further difficulties with respondent. Petitioner
carried on the same business, with the same clients, as had
Norman (as a proprietor). During the 1994 tax year, Norman and
Aline were the only directors and officers of petitioner.
Petitioner’s Federal income tax return for the 1994 tax year (the
1994 tax return) shows gross receipts of $309,630.35 and taxable
income of $1,178.30. On the 1994 tax return, petitioner claimed
no deduction for salaries and wages but did claim a deduction for
compensation of officers in the amount of $112,000, which amount
was reported by the Duquettes, $100,000 by Norman and $12,000 by
Aline, on the joint return of income that they made for 1994.
Norman was employed by petitioner to provide consulting services
to customers. Although Norman testified that petitioner employed
part-time consultants, petitioner has failed to identify those
individuals, and the 1994 tax return does not show any salary or
wage paid to any such part-time consultants. We conclude,
therefore, that, at least during the 1994 tax year, petitioner’s
sole business activity was offering Norman as a consultant.
The Duquettes were married in Rockville, Maryland, on
February 4, 1988, and they were divorced in Florida in June 1996.
They lived in Montgomery County, Maryland, until December 1991,
when they moved to Dallas, Texas. In Dallas, they made their
home in a condominium apartment located at 3510 Turtle Creek
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