Lucian T. Baldwin, III - Page 21




                                       - 21 -                                         
                           1988        1989     1990     1991     1992                
           Income:                                                                    
           Rental income   $168,400  $179,406 $109,185 $221,563 $200,390              
           Other income              16,148                                          
           Total income    168,400   195,554  109,185  221,563  200,390               
           Expenses:                                                                  
           Salaries & wages          31,778   48,627   40,260   40,000                
           Repairs                   87,433                                           
           Rents (Hangar)  7,618     12,345   16,208   18,310   17,826                
           Taxes                     18,694   4,561    3,166    3,612                 
           Depreciation    86,502    322,667  194,240  116,583  108,057               
           Employee benefits         4,408             108                            
           Other expenses    269,890  169,331  374,463   424,697  316,743             
           Total expenses  364,010   646,656  638,099  603,124  486,238               
           Net income or (loss)(195,610) (451,102)(528,914)(381,561)(285,848)             

               Accountant’s Role                                                      
               Throughout the years at issue, petitioner utilized the                 
          services of Victor DiMaggio, a certified public accountant.  Mr.            
          DiMaggio provided consulting services to petitioner with respect            
          to LFI and BAC, prepared LFI’s, BAC’s, BCC’s, and petitioners’              
          tax returns, and helped LFI’s and BAC’s employees set up and                
          maintain the books and records for those companies.  Mr. DiMaggio           
          also advised petitioner individually regarding some tax matters.            
          Petitioner instructed his employees to contact Mr. DiMaggio                 
          directly whenever they had any tax-related questions.                       
              At some point before he prepared petitioner’s 1989 return,             
          Mr. DiMaggio warned petitioner that LFI and BAC may be activities           
          not engaged in for profit and that, therefore, the losses                   
          attributable to those activities may be disallowed under section            
          183.  In addition, in the course of preparing BCC’s tax returns             
          for the years at issue, Mr. DiMaggio estimated that a substantial           
          portion of the amounts billed to BCC by LFI and BAC for 1990,               
          1991, and 1992 were attributable to petitioner’s personal use of            





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