- 4 - regarding petitioner’s wife’s furniture business. During 1998, petitioner’s wife attempted to begin a business that would sell fabric covered stools. A large portion of the $5,433 was spent on stools and the craft materials needed for covering the stools. She also claimed travel expenses for promoting her product. Respondent disallowed the $5,433 amount claimed on the ground that the activity was not yet a business; i.e., it was in a startup phase and the expenditures were capital in nature. In negotiating the 1998 settlement, the parties came to an agreement as to which deductions would be allowed and disallowed. Among other items, the parties agreed to the disallowance of the $5,433 deduction in exchange for the allowance of certain other losses claimed by petitioner. Petitioner and his accountant, Mr. Koll, were under the impression that the terms of the agreement included respondent’s agreement to allow the $5,433 deduction for 1999. During the negotiations, Mr. Koll suggested that petitioners be allowed to deduct the $5,433 for the 1999 tax year. Respondent’s counsel and Appeals officer did not make a response or expressly agree to Mr. Koll’s proposal. Because respondent’s counsel and the Appeals officer were silent, petitioner and Mr. Koll had the impression that an agreement had been reached. Later in the negotiations, respondent’s counsel and the Appeals officer informed petitioner and Mr. Koll that the $5,433 lossPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011