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R asserted inconsistent income tax deficiencies
with respect to P1, P2, and P3. R claimed that P1
owned the promissory notes until the time they were
paid, meaning that only P1 is taxable on the note
proceeds. In the alternative, R claimed that P1 gave
P2 and P3 an interest in the joint venture at the time
of its inception, meaning that only P2 and P3 are
taxable on the note proceeds. R also imposed additions
to tax under secs. 6653 and 6661(a), I.R.C., against
all petitioners.
1. Held: P1 gave P2 and P3 certain rights under
the earnest money contracts and is therefore not
taxable on the note proceeds.
2. Held, further, P2 and P3 owned the notes at
the time the notes were paid and are therefore taxable
on the note proceeds.
3. Held, further, R’s imposition of additions to
tax under secs. 6653 and 6661, I.R.C., is not sustained
as to P1.
4. Held, further, because P2 and P3 failed to
carry their burden of proof with respect to the
additions to tax, R’s imposition of additions to tax
under secs. 6653 and 6661, I.R.C., is sustained as to
P2 and P3.
Timothy O'Dowd and Edwin K. Hunter, for petitioners in
docket Nos. 345-92 and 352-92.
Robert I. White, Linda S. Paine, and William Grimsinger, for
petitioners in docket No. 900-92.
Stephen J. Davis, pro se in docket No. 352-92.
William Bissell, Portia N. Rose, and David B. Mora, for
respondent.
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Last modified: May 25, 2011