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Type of Expense Amount
Mortgage Loan $18,649
Real Estate Taxes 2,963
Electric Utilities 1,771
Telephone 271
Mitchums Creek Property
During 1994, pursuant to the Mitchums Creek contract,
Delaware Corporation paid a total of $17,807 in legal fees (legal
fees with respect to the Mitchums Creek property) for legal
services provided to Mr. Barber in connection with the litigation
with respect to the Mitchums Creek property.
Child Care
During 1994 and 1995, Delaware Corporation paid $7,762 (1994
child care expenses) and $3,321 (1995 child care expenses),
respectively, for the care of the children of Mr. Barber’s
daughters. Delaware Corporation did not treat those payments as
taxable fringe benefits.
Petitioners’ Respective Federal Income Tax Returns
Each petitioner filed tax returns (returns) for the years in
question as described below.
Delaware Corporation’s Returns
Delaware Corporation filed Form 1120, U.S. Corporation
Income Tax Return (Form 1120), for its taxable year 1994 (Dela-
ware Corporation’s 1994 return). Failes & Associates, P.C., was
the paid preparer (preparer) of that return. In Delaware Corpo-
ration’s 1994 return, Delaware Corporation claimed the following
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