Tony J. Cavender - Page 4

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               In early 1999, there was issued to petitioner on behalf of             
          Champion a Form W-2, Wage and Tax Statement (W-2), reflecting               
          that during 1998 Champion had paid wages to petitioner in the               
          total amount of $129,541.                                                   
               Petitioner’s 1998 individual Federal income tax return was             
          not timely filed.                                                           
               Champion’s 1998 corporate Federal income tax return was                
          timely filed with respondent.  On that corporate tax return, the            
          full $129,541 reflected as wages paid to petitioner on the above            
          W-2, including the $95,233 amount of check No. 1546, was                    
          reflected as a wage expense deduction of Champion.                          
               On November 5, 2001, pursuant to an audit and respondent’s             
          preparation of a substitute 1998 tax return for petitioner,                 
          respondent mailed to petitioner a notice of deficiency for 1998             
          in which respondent determined, among other things, that the                
          $95,233 face amount of check No. 1546 constituted taxable wage              
          income to petitioner in 1998.  Respondent also determined that              
          the additional $34,308 reflected on the W-2 issued to petitioner            
          constituted taxable wage income to petitioner in 1998.                      
               In September 2002, petitioner hired a certified public                 
          accountant to review petitioner’s and Champion’s books and                  
          records and to prepare tax returns on behalf of petitioner and              
          Champion.                                                                   








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