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the Korbys’ Social Security payments. KPLP paid the utility and
heating bills, property taxes, and insurance for the Korbys’
residence and paid for subscriptions to newspapers and
periodicals. For each year, KPLP deducted as a business expense
40 percent of the home expenses. The deductions were taken
because in an IRS audit for an earlier year, it was determined
that Austin used 40 percent of his home in his bridge-building
business and was entitled to deduct the cost of that portion.
KPLP also deducted the cost of Austin’s subscriptions to
newspapers and periodicals in each year.
The Korbys received Social Security income of $18,014 in
1995, $18,468 in 1996, $19,016 in 1997, and $16,751 in 1998. On
its Federal income tax returns and its books and records, KPLP
reported its interest and dividend income, value, and payments to
the living trust as follows:
Payments to
Year KPLP Income Living Trust KPLP Value
1995 $77,898 $30,387 $1,869,901
1996 72,434 19,334 2,185,581
1997 74,239 32,324 2,699,138
1998 77,343 38,750 12,625,821
1Value of KPLP assets on the date of Austin’s death.
KPLP reported distributions and guaranteed payments during 1995,
1996, 1997, and 1998 as follows:
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Last modified: May 25, 2011