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loan account to the firm for the total amount of disability
premiums paid in 1997 to Standard on Mr. Cotler’s behalf. These
adjustments normally took place when Mr. Gladstone prepared the
firm’s Form 1120. For the 1997 year, the adjustments were made
about the time the firm’s tax return for 1997 was filed. Mr.
Cotler’s insurance premiums that he paid were not deducted on the
firm’s 1997 Form 1120.
For 1997, Standard issued Mr. Cotler a Form W-2, Wage and
Tax Statement.3 On October 19, 1998, Mr. Cotler filed his Form
1040, U.S. Individual Income Tax Return, for 1997. Mr. Cotler’s
1997 tax return reported taxable income of $144,294. This
included $72,445 that Mr. Cotler received from Standard as
disability payments. At the time that Mr. Cotler signed and
filed his 1997 tax return, he was very ill and did not review the
return carefully. Mr. Cotler’s wife, Judy Cotler (Mrs. Cotler),
gathered the tax materials for 1997 and gave them to the return
preparer.
On October 22, 1999, Mr. Cotler filed his tax return for
1998. The $72,000 received from Standard in 1998 by Mr. Cotler
was reported as taxable income on his 1998 tax return. At the
time that Mr. Cotler signed and filed his 1998 tax return, he
still was very ill and did not review the return carefully.
3 We do not understand why Standard would issue Mr. Cotler
a Form W-2, but they did.
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Last modified: November 10, 2007