- 71 -
1997 Form 1040X, petitioners reported an increase in adjusted
gross income of $1,700,000, also derived from an additional
$1,700,000 of nonpassive income from partnerships and S
corporations.
The adjustments and deficiencies asserted in the statutory
notices for 1996 and 1997 were thereafter computed based on the
amounts reported in the Forms 1040X. Among the adjustments
reflected in the notice of deficiency for 1997 is a decrease in
income of $1,700,000 labeled “AGI CHANGE FORM 1040X” and
explained: “The $1,700,000 shown on your 1040X return for the
estimated increase in income from the related entities is
adjusted as shown above.” No similar adjustment was reflected in
the notice of deficiency for 1996.
Respondent on reply brief addresses the circumstances behind
the difference as follows:
Petitioners’ 1997 Forms 1040 and 1040X were prepared by
two different Certified Public Accountants. * * *
Insofar as Petitioners’ 1997 Form 1040X reported an
amount previously reported in the Form 1040, namely
$1,700,000.00 (now $1,750,000.00), the examiner
appropriately adjusted Petitioners’ Form 1040X by
reducing Petitioners’ income by the duplicative amount.
In taxable year 1996, on the other hand, there
were no such duplicative amounts between Petitioners’
Forms 1040 and 1040X. Consequently, Respondent’s
examiner made no similar adjustment in Petitioners’
1996 income as in their 1997 income. * * *
Thus, respondent offers an explanation as to why a reduction
for the increased adjusted gross income reported on a Form 1040X
Page: Previous 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 NextLast modified: May 25, 2011