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physicians’ practices”. Petitioner and his spouse each owned 50
percent of the corporation.
The activity of the corporation was simply collection of
fees charged by doctors to their patients for medical services.
Petitioner’s spouse performed all the activities of the
corporation by visiting doctors’ offices weekly, picking up their
billing invoices, collecting payment of these invoices from
primary and secondary insurers, and collecting directly from each
patient the portions not covered by insurance. Petitioner was
not involved in this activity. Petitioner was employed as an
insurance instructor for an unrelated employer.
There is no evidence in the record as to the corporation’s
business activity for the years 2000 and 2001. However, for the
year 2002 (the year at issue in this case), a Form 1120S, U.S.
Income Tax Return for an S Corporation, was filed. On that
return, the corporation’s taxable income was $18,627. The return
reflected issuance to the shareholders of the corporation
Schedules K-1, Shareholder’s Share of Income, Credits,
Deductions, etc. Although a copy of the Schedule K-1 issued to
petitioner was not offered into evidence at trial, respondent’s
official records were offered into evidence, which reflected a
Schedule K-1 for petitioner in the amount of $9,314, which is
one-half of the corporation’s net income of $18,627, rounded. On
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