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incorporated herein by this reference. When the petition was
filed, petitioners resided in Jacksonville, Florida.
During the relevant years, petitioners were married and
filed joint Federal income tax returns. Their 1990 through 1995
returns reported total income of $11,793 for 1990, a loss of
$4,246 for 1991, and total income of $3,967, $8,370, $12,471, and
$7,387 for 1992 through 1995, respectively. As to those returns,
only the 1990 and 1991 returns reported wage income. The
respective returns for 1990 and 1991 reported that Patricia A.
Welch (Ms. Welch) had received wages of $14,084 and $210. No
wage income was reported for Stewart L. Welch (Mr. Welch).
Beginning in 1988, Mr. Welch’s only source of income, but for the
business, rental, and gambling activities discussed below, was
worker’s compensation payments which he received through 1990.
Mr. Welch received in 1990 a $46,384 settlement payment as part
of those worker’s compensation payments.
Petitioners’ primary source of income during the subject
years was a cash sales business (business) that they operated at
various flea market booths. Petitioners began operating the
business in 1986, and both of them worked full-time in the
business after 1991. Petitioners’ 1993, 1994, and 1995 Federal
income tax returns reported the business’ gross income as
$36,711, $38,766, and $27,611, respectively, and its profit as
$8,217, $7,882, and $7,378, respectively. Petitioners’ only
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