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Richard J. Sapinski and Robert J. Alter, for petitioners.
Robert A. Baxter, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
HALPERN, Judge: Respondent determined deficiencies in
income tax and additions to tax as follows:
Additions to Tax and Penalties
Sec. Sec. Sec.
Year Deficiency 6651(a) 6661 6662(a)
1987 $88,837 --- $39,264 ---
1988 62,391 --- 13,020 ---
1989 58,838 $22,260 --- $11,768
1990 51,762 --- --- 10,352
After concessions, the issues remaining for decision are
(1) whether petitioners are allowed depreciation deductions with
regard to certain "exotic automobiles" owned and exhibited by
petitioner husband, (2) whether Exotic Bodies, Inc., an
S corporation within the meaning of section 1361(a)(1), was
engaged in a trade or business such that petitioners may claim
certain losses from that corporation, (3) the basis of certain
shares of stock in BSG Corp., and (4) petitioners' liability for
the additions to tax under section 6661 and penalties under
section 6662(a) set forth above.
In their opening brief, petitioners proposed no findings of
fact or made any argument with regard to the basis of any shares
in BSG Corp. In her opening brief, respondent argued that, since
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