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Deductions, Etc., for the five shareholders, including
petitioner. Line 23 of petitioner’s Schedule K-1, Supplemental
Information Required To Be Reported Separately to Each
Shareholder, stated: “The overall S corporation loss reported on
this K-1 is deductible only to the extent you have basis in your
S corporation stock. To the best of the bankruptcy trustee’s
knowledge your basis is $-0-.”
On her 1998 Federal income tax return, which was prepared by
Mr. Blodgett from prison, petitioner reported wage income of
$45,788.24 and income tax withheld of $5,582.56. The return also
included a $38,046,524 loss deduction on line 12, Business Income
or (Loss). This amount represented the amount listed on the
proof of claim filed by the Federal Trade Commission in the
bankruptcy case against T.G. Morgan, Inc. The return claimed a
refund of all of petitioner’s withholdings for 1998. A letter
attached to her return entitled “Explanation for Large Loss Carry
Forwards from 1992...for Diane S. Blodgett” stated:
In 1991, I was a “non-party” spouse signatory and
supposedly a beneficiary of a series of at least three
“consent settlement” contracts with the Federal Trade
Commission, and thus and under Minnesota marital property
and contract and RICO laws, promised property or property or
Constitutional rights which by breach of contract,
extortion, alienation, or other RICO or federal or state
civil or criminal misconduct were taken from me.
Documents suppressed by the parties at that time, later
became available showing wrongdoing and a high level
conspiracy involving very powerful people and lawyers.
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Last modified: May 25, 2011