- 7 - Profit or Loss From Business (Sole Proprietorship), to their joint return for 1992 reporting a loss of $1,890,682 for Mr. Assaad’s real estate development business. Petitioners reported gross receipts of $2,675,272, cost of goods sold of $2,226,664, and a gross profit of $448,608 for that business. Petitioners claimed expenses of $2,339,290 (separate from, and in addition to, the cost of goods sold). Petitioners did not report sufficient income on their 1992 Form 1040, U.S. Individual Income Tax Return, from which to deduct the entire loss. They carried forward the loss to their 1993, 1994, 1995, 1996, and 1997 taxable years. On petitioners’ 1996 and 1997 Forms 1040, they claimed net operating loss (NOL) carryforward deductions which reduced their taxable income to zero for those taxable years. In computing the gross receipts from the development business for 1992, petitioners did not report any of the proceeds from the foreclosure sale of 15 Isabella on the 1992 return. The gross receipts from that sale in 1992 were at least $2,052,385. For many years, Roy Hunt prepared petitioners’ tax returns, and he was their accountant. At some point, Anthony Lopez took over Mr. Hunt’s practice, and he became petitioners’ tax return preparer and accountant about a year before Mr. Hunt’s death. Mr. Lopez could not recall whether he prepared petitioners’ 1992Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011