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Business, realty advertising and auto expenses for 1996 and 1997
were reduced to zero because they did not establish the expenses
were paid during the taxable years and that they were ordinary
and necessary to their business; (4) the Wards’ Schedule C video
cost of goods sold and supplies expenses for 1996 and 1997 were
reduced to zero because they did not establish they were paid
during the taxable years and that they were ordinary and
necessary to their business; (5) the Wards’ Schedule C video
depreciation expenses for 1996 and 1997 were reduced to zero
because they did not establish the basis of the assets, that the
assets were depreciable, and that they were ordinary and
necessary to their business; (6) the Wards’ Schedule E,
Supplemental Income or Loss, income was increased by $407,362 for
1996 and $448,253 for 1997 because (a) the Wards’ trust
arrangements were shams or grantor trusts, or alternatively due
to assignment of income, (b) of income from a partnership, and
(c) of failure to establish that $1,487 for 1996 from Video City
Shepard and $4,576 for 1997 from Arctic Video City were losses
the Wards sustained; (7) self-employment tax adjustments for 1996
and 1997; and (8) accuracy-related penalties for 1996 and 1997
due to negligence or substantial understatement of tax.
In the notices of deficiency issued to ASI, GND, WT, and GNI
(collectively, the trusts) respondent took protective,
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Last modified: May 25, 2011