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Petitioner and Trupin filed joint Federal income tax returns
for 1982 through 1986. They reported taxable income of $36,648,
$56,181, $72,755, none, and none, on those returns, respectively.
On the tax returns, a “W” was placed next to items to signify
that the item was attributable to petitioner. On the 1982 and
1983 returns, a “W” was placed next to losses of $152,073 and
$223,155, respectively, from American National Associates 367
(ANA 367).
Trupin’s tax shelter business began a rapid decline as a
result of changes in the tax law in 1986. In a letter dated
July 15, 1987, in relation to a requested extension of time to
file RRI’s tax return for the year ended October 31, 1986, RRI’s
accountants represented:
The extension requested is for the fiscal year
ended October 31, 1986. Through 1985 the taxpayer’s
organization employed approximately 50 people in the
headquarter’s office which included 12-15 accounting
and financial personnel. After 1985, the Rothschild
organization has had no sales whatsoever of its
products i.e., commercial real estate and leased
computer equipment, from which it had previously
derived its income. In fact, it is estimated that
losses of $2,000,000 to $5,000,000 may have been
realized, virtually eliminating the corporation’s
equity. Because of the sudden decimation of the
taxpayer’s business, only three part time (out of 50
full time) personnel remain to handle the
administration of the corporation’s business.
The corporation, in the last six months, had to
abandon its offices at 888 Seventh Avenue, and has
moved twice. In the chaos of multiple moves with
minimum personnel, hundreds of transfiles were loaded
and placed in storage. The task of locating and
retrieving needed information in order to properly file
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