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Mr. Wright is the sole stockholder of Wright & Associates
and during 1999, 2000, and 2001 owned and operated the S
corporation. A Form 1120S, U.S. Income Tax Return for an S
Corporation, was filed for Wright & Associates for the years in
issue. Petitioners are, and were during the years in issue,
officers of Wright & Associates. Mr. Wright also owns, and owned
and operated during 1999, 2000, and 2001, Consultation &
Mediation Services, L.L.C. (Consultation & Mediation), a single
member limited liability company. Consultation & Mediation did
not file Federal tax returns for the years in issue as it was a
disregarded entity4 and its relevant tax matters were reported on
Schedule C, Profit or Loss From Business, of petitioners’ joint
Form 1040, U.S. Individual Income Tax Return.
Mr. Wright performed accounting services for, and provided
tax advice to, clients of Wright & Associates, and Mrs. Wright
performed secretarial duties for Wright & Associates, for which
they were compensated during the years in issue. Mr. Wright also
provided investment advice to individuals, including, inter alia,
Jo Ann Mohr (Ms. Mohr).5 During 1999 and 2000, Mr. Wright taught
4“A business entity with only one owner is classified as a
corporation or is disregarded; if the entity is disregarded, its
activities are treated in the same manner as a sole
proprietorship, branch, or division of the owner.” Sec.
301.7701-2(a), Proced. & Admin. Regs.
5Jo Ann Mohr (Ms. Mohr) was not a client of Wright &
Associates. The record does not indicate whether Ms. Mohr was a
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