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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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