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McKenzie Trust did not make any distributions, report any taxable
income, or pay any taxes.
C. Examination of the McKenzie Trust’s 1998 Tax Return
The McKenzie Trust reported business income from the
automobile restoration business and claimed deductions for
attorney, accountant, and return preparer fees and other
deductions. The deductions claimed by the McKenzie Trust
exceeded its income, and the trust did not make any distributions
or pay any taxes in 1998.
On June 5, 2001, Mr. Boatright signed Form 2848, in which he
designated Mr. Izen to represent the McKenzie Trust before the
IRS for tax matters relating to the trust’s 1997, 1998, and 1999
taxable years, and Form 56. Mr. Boatright did not authorize Mr.
Izen to perform any specific additional acts in the power of
attorney and left the spaces on the Form 2848 for any such
authorizations blank. The IRS agent accepted the Forms 56 and
2848 and never determined that they were invalid.
On October 10, 2002, respondent issued a notice of
deficiency to the McKenzie Trust for its 1998 taxable year, in
which respondent disallowed all of the McKenzie Trust’s
deductions for business expenses, management fees, and fiduciary
fees. Accordingly, respondent increased the trust’s taxable
income by $5,834.
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