Thomas and Janice Gleason - Page 10

                                       - 10 -                                         
          Year              Target            Alofs         Excellence                
          1993           $113,311            --             --                        
          1994           245,886             $401,192       $312,699                  
          1995           (616,947)           296,614        807,012                   
          1996           (800,000)           -0-            --                        
          Included with the 1996 Schedule E was a statement pertaining to             
          Target and a statement pertaining to Alofs indicating that the              
          figures reported were projected amounts in that returns for the             
          entities had not yet been filed due to recent bankruptcy.  For              
          years 1993, 1994, and 1995, petitioners also included on                    
          Schedules B, Interest and Dividend Income, taxable interest from            
          Schedules K-1.                                                              
               Subsequently, petitioners submitted joint Forms 1040X,                 
          Amended U.S. Individual Income Tax Return, signed in September of           
          1998, for 1993, 1994, and 1995.  Each of these amended returns              
          was based on the carryback of a net operating loss (NOL) from               
          1996, eliminated petitioners’ taxable income for the respective             
          periods, and requested substantial refunds.  Attached to each               
          Form 1040X was a “pro forma” Form 1040 for 1996 and supporting              
          schedules showing the genesis of the NOL.3  As relevant here, the           
          principal differences between the original 1996 return and the              
          pro forma version were the inclusion of an additional $7,043 of             
          taxable interest and the reporting of a loss from Schedule E of             


               3 It is not clear from the record whether petitioners at any           
          time in fact submitted a Form 1040X, Amended U.S. Individual Tax            
          Return, with respect to 1996.                                               





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