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Petitioners’ 2000 return was prepared by their certified
public accountant Wendy Boise (Boise). During the discussions in
chambers mentioned above, Boise had asked Kidd whether any
settlement payment that he received would be reported as income
to him, and plaintiffs’ counsel relayed this question to the
defendants’ counsel and to the presiding Judge. The latter two
individuals declined to opine on the matter and referred the
plaintiffs to Nageley in its capacity as trustee. By way of
conversations between the plaintiffs and Nageley, Nageley led
Kidd to believe that any settlement would not be taxed to him and
that he would not be issued a Form 1099-MISC, Miscellaneous
Income, as to any payment that he received pursuant to the
settlement. Kidd also was advised by other attorneys that they
would not issue a Form 1099-MISC to their clients in a similar
situation.
In early 2001, contrary to his understanding, Kidd received
a 2000 Form 1099-MISC from Nageley that reported that the
$132,000 was taxable to him as “other income”. Kidd asked Boise
not to report the $132,000 on petitioners’ 2000 return, and she
did not. Boise advised Kidd to attach to that return the 2000
Form 1099-MISC issued to him, but he asked her not to do so
because he believed that he would be admitting to its taxability.
Kidd also noted to Boise that the $132,000 would be reported to
respondent on respondent’s copy of the 2000 Form 1099-MISC.
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