Eyefull Incorporated - Page 2

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                    business.  Held, further, P is liable for the                     
                    accumulated earnings tax.                                         
               Robert E. Miller and Edith S. Thomas, for petitioner.                  
               Alexandra E. Nicholaides and Eric R. Skinner, for                      
               respondent.                                                            


                                 MEMORANDUM OPINION                                   


               LARO, Judge:  Petitioner sought redetermination of                     
          deficiencies in Federal income taxes, additions to tax, and                 
          penalties determined by respondent as follows:                              
          Taxable Year                       Additions to Tax    Penalty              
          Ended                              Sec.      Sec.     Sec.                  
          August 31           Deficiency     6651(a)(1) 6653(a)    6662               
          1989                $124,721       $1,192    $11,396        ---             
          1990                208,903        1,487          ---    $1,189             
          1991                216,364        36,336    ---    29,069                  
          1992     16,706    --- ---      ---                                         
          After concessions by both parties, the issues for decision are:1            
          (1) Whether petitioner may deduct payments made to one of its               
          ultimate beneficial owners as compensation for services. We hold            
          that it may. (2) Whether petitioner is liable for accumulated               
          earnings tax.  We hold that it is liable with respect to 3 of the           
          4 taxable years at issue.  (3) Whether petitioner is liable for             
          additions to tax under sections 6651 and 6653(a) and for                    


               1 Unless otherwise indicated, section references are to the            
          Internal Revenue Code in effect for the years at issue, and Rule            
          references are to the Tax Court Rules of Practice and Procedure.            




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