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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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