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the formation of AMC Trust, the income of the asphalt business
was reported on AMC Trust’s Form 1041. AMC Trust claimed income
distribution deductions, flowing the profits of the asphalt
business to Oliver & Co. Neither AMC Trust nor Oliver & Co.
reported any taxable income or any tax liability for the years in
issue.
On its Forms 1120S, J&J reported total income of $47,968.13
for 1993; $69,971 for 1994; $1,160 for 1995; a loss of $11,983
for 1996; and zero income for 1997 through 2001. On
Schedules K-1, Shareholder’s Share of Income, Credits,
Deductions, etc., attached to the returns for 1993 through 1996,
J&J’s income was shown as distributed 49 percent to J.O. and
51 percent to Patricia.
On Schedules C to its Forms 1041, AMC Trust reported profit
or loss from the asphalt business as follows:
Year Profit or loss
1996 $111,712
1997 42,552
1998 75,051
1999 288,096
2000 79,567
2001 66,363
On each of its Forms 1041, AMC Trust reported taxable income of
minus $100, after deducting the total reported profit as an
“income distribution deduction”. The profits from the asphalt
business in fact exceeded the amounts set forth above because of
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Last modified: May 25, 2011