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$21,043 for 1991, 1992, and 1993, respectively. Respondent
issued refunds in those amounts on February 5, 1996.
Petitioner filed his 1995 Federal income tax return on
August 5, 1996. On an attached Schedule F, petitioner reported
the following:
Farm income, sales of livestock $80,928
Depreciation (83,351)
Interest expense (24,600)
“1994 Sharecropboard exp” (80,928)
Net farm profit or (loss) (107,951)
With respect to the depreciation deduction, petitioner attached a
depreciation schedule reporting a cost basis in his “registured
[sic] cattle” of $625,100. Petitioner subtracted his net farm
loss of $107,951 from wage, interest, and capital gains income
totaling $132,527 for total income of $24,576. After subtracting
other deductions, petitioner reported zero taxable income and
zero taxes due. Petitioner reported taxes withheld of $8,788 and
requested a refund of that amount. Respondent did not issue a
refund for 1995.
D. Respondent’s Review of Petitioner’s Tax Claims
On January 10, 1996, nearly 7 months before petitioner filed
his 1995 return, respondent sent petitioner a prefiling notice.
The prefiling notice informed petitioner that he had been
identified as an investor in a tax shelter promoted by Hoyt. It
further informed petitioner that deductions relating to the tax
shelter would not be allowed and that claiming such deductions
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