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F. Income Tax Returns
Mr. Bleeker (petitioners’ counsel) prepared the Hubers’
joint Forms 1040, U.S. Individual Income Tax Return, and
Waterfall Farms’ Forms 1120, U.S. Corporation Income Tax Return,
for the years at issue.
1. Waterfall Farms
Waterfall Farms filed timely its Forms 1120 for the taxable
years ended November 30, 1995, 1996, and 1997. On these returns,
Waterfall Farms reported total income and total deductions as
follows:
11/30/95 11/30/96 11/30/97
Total income $27,500 $20,172 $30,132
Total deductions 24,769 18,404 29,699
Taxable income 2,731 1,768 433
Included in the total expenses deducted by Waterfall Farms
were the following items for food, lodging, and medical expenses
provided to the Hubers:
11/30/95 11/30/96 11/30/97
Food & lodging
Food for employees $4,290 $4,395 $4,709
Rent –- –- 7,500
Food & lodging expenses 4,290 4,395 12,209
Medical
Medical insurance $1,224 $1,297 $3,048
Medical expenses -- –- 1,456
Total medical 1,224 1,297 4,504
Waterfall Farms filed Forms 1120X, Amended U.S. Corporation
Income Tax Return, for its fiscal years ended November 30, 1995
and 1996, that were received by the Internal Revenue Service in
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