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share of, and as a property distribution other than a dividend
to, Stark. Petitioner’s Forms 1120S were signed by Stark as
president and by Joseph M. Grey (Grey) as preparer.
During the period from 1996 to 1998, petitioner did not
issue any Forms 1099-MISC, Miscellaneous Income, or Forms W-2,
Wage and Tax Statement, to Stark. Throughout the years in issue,
petitioner did not report paying Stark a salary or wages for work
he performed on behalf of petitioner. Petitioner did issue
separate Forms 1099-MISC in 1996, 1997, and 1998 reporting
nonemployee compensation to a number of individuals other than
Stark, presumably independent contractors hired to perform
various aspects of petitioner’s remodeling work.
Petitioner did not file a Form 941, Employer’s Quarterly
Federal Tax Return, for any quarter in 1996, 1997, or 1998 or a
Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax
Return, for 1996, 1997, or 1998.
Stark’s Tax Reporting
For each of the years 1996, 1997, and 1998, Stark timely
filed a Form 1040, U.S. Individual Income Tax Return. On these
returns, Stark reported as ordinary income from “Rental real
estate, royalties, partnerships, S corporations, trusts, etc.”
$10,866.14, $14,216.37, and $7,103.60 for 1996, 1997, and 1998,
respectively. Attached Schedules E, Supplemental Income and
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