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Sunday, March 23, 2003

 


JKH Enterprises, Inc., A California Corporation was wholly owned by attorney Jack H. Kaufman, and its business consisted primarily of leasing office space and equipment to Jack H. Kaufman, A Professional Corporation, also wholly owned by Kaufman. Kaufman wrote 43 checks on his business account that were dishonored due to insufficient funds, but it was the dishonored check to Yosemite National Park that got him convicted by the Feds. This led to a ninety day suspension from the Bar. Kaufman sold all of his shares in Jack H. Kaufman APC to another attorney who became its sole employee. Jack H. Kaufman APC took a deduction that year for �equipment retired�, which referred to client files and goodwill. IRS consented to this deduction at the Appeals Office. Certainly no one could easily dispute that Kaufman�s goodwill had been retired. JKH Enterprises also claimed a large loss that year for �abandonment of equipment�. Tax Court ruled first that Kaufman failed to establish that client files and goodwill had been transferred to JKH Enterprises rather than Jack H. Kaufman APC, and ruled he could not take a loss deduction for those assets because he had not established ownership of them. Kaufman also failed to establish that JKH had abandoned any tangible assets since Jack H. Kaufman APC had continued to operate throughout the tax year. Further Kaufman could not establish that his basis in the abandoned assets was greater than zero. Finally, Tax Court asserts that it can read the date stamp showing when the IRS received the return despite Kaufman�s claim that the date was illegible. As a result, Kaufman owed a 15% penalty for filing three months late.



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