- 20 -
petitioner received from the Houston firm in 1988 was not
a loan, as petitioners claimed, and should have been
included in petitioners' income as ordinary income, less
petitioner's basis of $195,351 (i.e., net ordinary income
of $304,649). Respondent also determined that the payments
of $552,218 and $617,482 petitioner received in 1989 and
1990, respectively, from the Houston firm, are ordinary
income, rather than capital gain, as reported by
petitioners on their tax returns.
Respondent also determined that petitioners are liable
for the addition to tax under section 6651(a)(1) for
failure to timely file their 1988, 1989, and 1990 returns.
Respondent determined that the extension of time to file
each of petitioners' tax returns for 1988, 1989, and 1990
was invalid because in filing Form 4868, for each of those
years, petitioners did not properly estimate their correct
tax. The notice of deficiency describes this determination
as follows:
Since your income tax returns for 1988, 1989 and
1990 were not filed within the time prescribed
by law, and it is determined that the extensions
you filed were invalid since you did not properly
estimate your correct tax, 25 percent of the
total underpayment of tax is added as provided
by section 6651(a)(1) of the Internal Revenue
Code * * *
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011