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petitioners reported gross income of $38,220 and total expenses
of $38,220. On the 1996 return, petitioners claimed multiple
deductions for some of the same expenses.
B. Beacon’s Tax Returns
On or about August 12, 1994, Beacon submitted an “Estimated”
Form 1120S, U.S. Income Tax Return for an S Corporation, for the
taxable year 1993 (Beacon’s 1993 “Estimated” return) along with
petitioners’ 1993 “Estimated” return. Beacon’s 1993 “Estimated”
return reflected that Beacon was on the cash receipts and
disbursements method of accounting (cash basis) for Federal
income tax purposes.6
On or about March 4, 1997, Beacon filed with the IRS a
second Form 1120S for the taxable year 1993 (Beacon’s 1993
return). Beacon’s 1993 return reported total income and total
deductions of $13,691 and $24,248, respectively, for a loss of
$10,557. Beacon’s total deductions included travel expenses of
$13,717.
Along with petitioners’ 1994 “Estimated” return, Beacon
submitted for the taxable year 1994 a Form 1120S with “Estimated”
written on the top of the first page (Beacon’s 1994 “Estimated”
return). Beacon’s 1994 “Estimated” return reported total income
and total deductions of $5,000 and $2,710, respectively.
6 At all relevant times during the years in issue, Beacon
used the cash basis method of accounting for Federal income tax
purposes.
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