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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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