Walter L. Medlin - Page 21

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          petitioner reported as income for 1986.  Petitioner reported                
          taxable income of $2,058 and a tax of $0.                                   
               On petitioner’s Form 1040, Schedule C, for 1987, petitioner            
          listed his principal business or profession as “Real Estate                 
          Development”.  He reported no income from gross receipts or                 
          sales, reported $138,653 as “Other income * * * Fees, int, &                
          Sales”, and claimed deductions of $94,434.  See appendix A.                 
          Petitioner reported a net profit from his real estate development           
          business of $44,219 on his Form 1040.  This was the only amount             
          petitioner reported as income for 1987.  Petitioner reported                
          taxable income of $37,879 and a tax of $7,515.                              
               On petitioner’s Form 1040, Schedule C, for 1988, petitioner            
          listed his principal business or profession as “Developer/Real              
          Estate”.  Petitioner reported $61,921 as income from gross                  
          receipts or sales, reported no “Other income”, and claimed                  
          deductions of $43,713.  See appendix A.  Petitioner reported a              
          net profit from his real estate development business of $18,208             
          on his Form 1040.  This was the only amount petitioner reported             
          as income for 1988.8  Petitioner reported taxable income of                 
          $5,206 and a tax of $784.                                                   
               In 1985, petitioner purchased a ring, earrings, and two                
          necklaces for Ms. Allen as a gift.  Those items cost $14,540,               


               8Petitioner claimed an S corporation loss from Frank’s                 
          Corner, Inc., of $4,702 in 1988.                                            





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