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With input from Moe, petitioners prepared and filed their
1992 and 1994 joint tax returns. On the Schedule C, Profit or
Loss From Business, attached to their 1992 individual income tax
return, they reported $103,046 in gross receipts relating to
Western’s law practice (i.e., $90,000 of compensation and $13,046
of rent payments from Western). On the Schedule C attached to
their 1994 individual income tax return, they reported $102,565
in gross receipts relating to Western’s law practice (i.e.,
$90,000 of compensation and $12,565 of rent payments from
Western) and a $1,475 depreciation deduction relating to the
automobile.
Western’s fiscal year ends on March 31. On its 1992, 1993,
1994, and 1995 corporate income tax returns, Western deducted
officers’ compensation expenses in the amounts of $135,000,
$144,000, $132,000, and $133,000, respectively. Petitioner
amended Western’s 1991 Form 941, Employer's Quarterly Federal Tax
Return, with the following statement:
The amount of earnings of Employee Robert E. Kovacevich
was not clear, hence was left off. The Employee paid
all Income Tax due, hence the withholding is
unnecessary. However the Social Security Tax is due.
A completed W-2(c) term is included.
On September 30, 1995, Western made a payment of $22,583 in
income tax withholding relating to petitioners’ 1992 and 1993
employment taxes.
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Last modified: May 25, 2011