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petitioner caused $625,000 to be electronically transferred to
the Government as required under the settlement agreement.
During 1997, OMCC paid a total of $83,202 in legal and
professional fees related to the farm loan litigation to two law
firms: Donaldson, Albert, Tweet, Connolly, Hanna, & Muniz
(Donaldson, Albert) and Stewart, Sokol & Gray (Stewart, Sokol).
Donaldson, Albert billed OMCC, whereas Stewart, Sokol billed
petitioner. During 1997, OMCC paid $26,584.16 to Donaldson,
Albert and $56,617.84 to Stewart, Sokol.
H. OMCC’s and Petitioner’s 1997 Tax Returns and the Notice of
Deficiency
On its Form 1065, U.S. Partnership Return of Income, for
1997, OMCC deducted, inter alia, $625,000 for “litigation” and
$87,490 for “legal and professional”. OMCC reported a net farm
loss for 1997 of $354,477 and that petitioner made a $25,876
capital contribution to the partnership during 1997.
OMCC issued to petitioner and Mildred separate Schedules
K-1, Partner’s Share of Income, Credits, Deductions, etc., for
1997. OMCC allocated ordinary losses of $352,705 to petitioner
and $1,772 to Mildred. On her Form 1040, U.S. Individual Income
Tax Return, for 1997, petitioner reported net farm rental income
of $195,298, offset by the $352,705 partnership loss allocated to
her by OMCC, resulting in a loss of $127,997 for the year.
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