-18- 9. Relevant Financial Information Funny Hats filed a Form 1065, U.S. Partnership Return of Income, for each year from 1994 through 2000. These returns state that the principal business activity of Funny Hats is “rental” and that its principal product or service is “real estate”. According to the returns, Funny Hats received rent and incurred related expenses, depreciation, and net losses as follows:7 1994 1995 1996 1997 1998 1999 2000 Gross rents $11,250 $7,200 $9,600 $10,200 $6,000 $17,000 $4,000 Cash expenses: Insurance -0- -0- 2,279 100 1,203 1,208 1,208 Legal fees 280 521 649 663 691 747 942 Taxes -0- 8,940 9,072 9,251 9,501 4,819 10,309 Miscellaneous -0- 19 -0- 33 -0- -0- -0- Travel -0- -0- -0- -0- -0- -0- 6,397 Business meals -0- -0- -0- -0- -0- -0- 769 Repairs & maint.8,663 401 238 2,265 4,216 5,343 531 Exterminating -0- 76 81 -0- 81 119 -0- Bank charges -0- -0- -0- 13 10 96 100 8,943 9,957 12,319 12,235 15,702 12,332 20,256 Depreciation1 8,364 8,773 8,921 9,003 8,947 9,022 7,975 17,307 18,730 21,240 21,328 24,649 21,354 28,231 Net loss 6,057 11,530 11,640 11,128 18,649 4,354 24,231 1Funny Hats claimed depreciation on the entire house and not just on the portion of the residence that was purportedly rented to decedent. Funny Hats also reported for 1997 through 2000 that it had received interest income of $529, $177, $73, and $580, respectively. Funny Hats also reported for 2000 that it had realized a $51,418 “net section 1231 gain”. 7 Funny Hats also filed a 1993 Form 1065 that did not report any income or expense. The 1993 Form 1065 reported that the residence was an asset of Funny Hats and that the principal business activity of Funny Hats was “inactive”.Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Next
Last modified: May 25, 2011