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of his lawsuit with Allied consisted of payments to attorneys and
consultants and expenses associated with maintaining an office.
Petitioner’s Income Tax Returns for 1995 through 1999
On October 15, 1996, petitioner filed his Form 1040, U.S.
Individual Income Tax Return, for 1995. Attached to his income
tax return was Form 8275, Disclosure Statement, in which
petitioner stated:
On November 17, 1995 I received a settlement amount by
compromise of my Judgment owed to me by the State of
Texas. In my settlement agreement I received
$3,427,999 actual damages for personal/physical
injury/sickness. * * * This settlement amount is
nontaxable and not subject to tax.
Additionally, with respect to petitioner’s interest in Green
Capital, petitioner reported losses in the amount of $350,752.
Petitioner’s return for 1995 showed no tax due.
On August 13, 1997, petitioner filed his income tax return
for 1996. On his return, petitioner reported receipt of $257,076
of annuity income, of which $95,088 was reported as taxable.
Additionally, with respect to petitioner’s interest in Green
Capital, petitioner reported losses in the amount of $190,943.
Petitioner’s return for 1996 showed no tax due.
On October 15, 1998, petitioner filed his income tax return
for 1997. On his return, which was prepared by Hunter & Atkins,
Inc. (Hunter & Atkins), petitioner reported receipt of $257,076
of annuity income, of which $95,088 was reported as taxable.
Attached to his return was Form 8275, in which petitioner stated:
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