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On December 29, 2000, petitioners subscribed to the program.
Petitioners chose promotional service program C and furnished
four referrals in the subscription agreement. Petitioners paid
AdaCom $2,500 ($100 in 2000 and $225 per month for 12 months in
2001)4 and were credited with $7,750 in promotional services for
a subscription to the program for the tax year 2000.
AdaCom issued a Form 1099 to petitioners in the amount of
$7,750 for the 2000 tax year. This amount represented the
alleged bartering income from AdaCom for promotional services and
was reported on a Schedule C for “Worldwide Products” for the
taxable year 2000.
On the basis of their subscription to the program,
petitioners claimed a $5,250 business expense deduction and a
$5,000 section 44 credit on their income tax return for 2000.
Petitioners carried over a portion of the section 44 credit to
2001. The deficiency for the taxable year 2001 results from a
carryover of the section 44 credit from the taxable year 2000.
Respondent determined a deficiency in petitioners’ Federal income
tax for 2001 in the amount of $2,474 as a result of the
disallowance of petitioners’ claimed carryover of the section 44
credit.
4 The total payments made by petitioners and stipulated by
the parties equal $2,800. The parties fail to explain the
discrepancies contained in the stipulation of facts.
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Last modified: May 25, 2011