Jerry L. and Valerie J. Hill - Page 3

          not all of petitioners’ personal assets to Re-Cap Trust.  Neither           
          Hill nor his wife had beforehand consulted a competent                      
          professional concerning the Federal income tax consequences of              
          Re-Cap Trust.                                                               
               As to the subject year, Re-Cap Trust filed a 1999 Form 1041,           
          U.S. Income Tax Return for Estates and Trusts, that reported                
          total income of $332,520 and total deductions of $330,818.  With            
          the exception of interest income of $435, the total income was              
          all attributable to commissions for realtor services performed by           
          Hill.  The deductions claimed by Re-Cap Trust were in part for              
          petitioners’ personal expenses, including many of their personal            
          living expenses.  Re-Cap Trust reported on this Form 1041 that              
          its 1999 total tax was $255.                                                
               Re-Cap Trust also claimed on that form a deduction for gifts           
          and donations totaling $21,439.  The record does not identify the           
          individual amounts which go into the $21,439.1  Nor does the                
          record include a “written acknowledgment”, sec. 170(f)(8), from             
          any recipient who received a payment of $250 or more.                       

               1 Although petitioners have referred to various purported              
          charities and note that the record contains checks drawn on the             
          checking account of Re-Cap Trust, we are unable to reconcile our            
          total of the checks payable to those referenced “charities” to              
          the $21,439 claimed by petitioners.                                         

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