- 2 -
1. Held: The ultimate test for determining
whether a taxpayer is at risk pursuant to sec.
465(b)(4), I.R.C., is whether there is a realistic
possibility of economic loss. Based on the facts
presented, P has not established that there was any
realistic possibility that he would be subject to
economic loss as a result of his long-term notes.
2. Held further, Ps are subject to additions to
tax under sec. 6653(a), I.R.C., for negligence.
3. Held further, Ps are subject to additions to
tax under sec. 6661, I.R.C., for substantial
understatement of income tax liability.
4. Held further, Ps are liable for the increased
rate of interest imposed under sec. 6621(c), I.R.C.,
for substantial underpayments attributable to tax-
motivated transactions.
Richard S. Kestenbaum and Bernard S. Mark, for petitioners.
Theodore R. Leighton, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
HALPERN, Judge: These two cases have been consolidated for
trial, briefing, and opinion. Respondent has determined
deficiencies in income taxes, additions to tax, and increased
interest as follows:
Additions to Tax
Sec. Sec. Sec.
Year Deficiency 6651(a)(1) 6653(a)(1) 6653(a)(2)
1980 $81,541.67 $16,477.20 $5,097.06 ---
1981 35,032.19 5,254.83 4,116.46 50% of interest
due on $15,956
1982 246,433.50 --- 12,321.68 50% of interest
due on $3,195
1983 411,000.00 --- 21,312.00 50% of interest
due on $411,000
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Last modified: May 25, 2011