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On March 31, 1986, petitioner incorporated Barad Plumbing
Corp. (Barad) in the State of New York, County of Suffolk. Barad
has never filed corporate Federal income tax returns. To date,
Barad has not dissolved, but its status is listed by the NYS
Department of State, Division of Corporations, as inactive.
Sometime after petitioner was licensed as a master plumber
and incorporated Barad, he, as agent for Barad, entered into
contracts with the City of New York (the City). Barad was later
declared to be in default of those contracts. Barad ceased
performing plumbing services around 1989.
Petitioners filed Form 1040, U.S. Individual Income Tax
Return, for 2001 reporting Schnell’s wages of $46,406 and
claiming business losses of $38,500. On Schedule C, Profit or
Loss From Business, for Barad, petitioner claimed $34,500 of bad
debts, $1,500 of advertising expenses, and $2,500 of office
expenses. A tax refund of $3,946, the amount of Federal income
tax withheld from Schnell’s wages for the year, was requested by
petitioners.
For 2002, petitioners reported Schnell’s wages of $48,461.91
and claimed business losses from bad debts of $34,000. A tax
refund of $3,532, the amount of Federal income tax withheld from
Schnell’s wages for the year, was requested by petitioners.
Similarly, for 2003, petitioners reported Schnell’s wages of
$50,587.63 and claimed business losses from bad debts of $35,000.
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