- 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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