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On their 1996 Form 1040, petitioners reported adjusted gross
income of $11,069, which amount incorporated a $1,920 loss from
Schedule C, a $3,000 capital loss, and $4,552 of other income.
An attached statement showed that the other income comprised two
“DIRECTORS FEES” of $1,500 each and two “PERSONAL USE OF AUTO”
amounts of $881 and $671. The Schedule C loss for Asset
Protection Services was computed by subtracting $135,088 in
expenses from gross income of $133,168. Taxable income is shown
as zero and total tax as $212 (on account of self-employment
tax).
The 1997 Form 1040 similarly reflected adjusted gross income
of $9,694, including $1,006 in business income from Schedule C, a
$3,000 capital loss, and other income of $8,190. The other
income included two “DIRECTORS FEES” of $3,000 each and two
“PERSONAL USE OF AUTO” amounts of $1,095 each. The Schedule C
income of $1,006 was derived from $8,127 in gross income and
$7,121 of expenses. Petitioners’ taxable income was shown as
zero and total tax as $990.
On the Forms 1041 filed on behalf of HGAMC for 1996 and
1997, respectively, petitioners reported interest income ($74 and
$2,497) and business income from an attached Schedule C ($262,806
and $54,902) and deducted therefrom principally fiduciary fees
($3,000 and $6,000) and charitable deductions to HGRCT ($259,880
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