3 The issues for decision are (1) whether the burden of proof should be shifted from corporate petitioners to respondent with respect to the issues of substantiation of claimed expenses for rent and management fees; (2) whether disputed amounts of $26,881, $3,721, and $3,136 allegedly paid respectively by Alondra, Edco, and Pertinax to Joel Munro (Mr. Munro) for rent are deductible by petitioners as ordinary and necessary business expenses; (3) whether and to what extent $1,000,112 paid to Mr. Munro is deductible by Pertinax as reasonable compensation; (4) whether disputed amounts of $906,879 and $9,922 allegedly paid respectively by Alondra and Edco to Pertinax as management fees are deductible by Alondra and Edco as reasonable compensation; (5) whether disputed amounts of $884,148 and $35,671 paid respectively by Alondra and Edco to Pertinax for wages paid to employees of Pertinax, some of whom also served as officers of Alondra and Edco, are deductible by Alondra and Edco as ordinary and necessary business expenses; (6) the proper tax treatment of unreasonable compensation routed to Mr. Munro by Alondra and Edco through Pertinax; and (7) whether Alondra and Edco are liable for additions to tax for negligence under section 6653(a)(1)(A) and (B)2 and Alondra is liable to the addition to tax for substantial understatement under section 6661(a). 2Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years at issue. All Rule references are to the Tax Court Rules of Practice and Procedure.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011