Frank H. and Marla C. Black - Page 7




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               Mr. Black wrote a letter as manager of Robert Thomas                   
          Securities to Lincoln National Insurance canceling a group                  
          medical insurance policy and stating that his business was                  
          renewing a group medical insurance policy with Continental                  
          Insurance.                                                                  
               Special Agent O’Dell stated in his report that Mr. Black               
          paid a total of $4,371 in health insurance premiums during the              
          period January through July 1991, before terminating the policy.            
               During 1992, Mr. Black paid the C.P.A. firm of Martinson,              
          Newton & Co., C.P.A.s, a fee of $225 for preparing petitioners’             
          1991 joint return, and for preparing amended joint Federal and              
          State income tax returns for 1990.                                          
               During 1992, Mr. Black paid Bob West a fee of $250 to form             
          Mr. Black’s North Carolina C-Corporation, Frank Black, Inc.                 
               The notice of deficiency treated both the $225 income tax              
          return preparation fee and the $250 incorporation fee as                    
          nondeductible expenditures for purposes of respondent’s net worth           
          computation.                                                                
               During 1991 and 1992, petitioners made credit card payments            
          totaling $22,796.48 and $20,320.19, respectively, all of which              
          payments were treated as nondeductible in the notice of                     
          deficiency.                                                                 
               Petitioners claimed Schedule C, Profit or Loss From                    
          Business, deductions on their 1991 joint return for payments of             







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