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under section 6662(b)(1) for negligence or disregard of rules and
regulations; and (c) GAPS and JJM for additions to tax under
section 6655 for failure to pay estimated tax.
We hold that: (1) GAPS and JJM are not entitled to any
additional expense deductions; (2) the payments by GAPS and JJM
were corporate distributions--dividends to the extent of earnings
and profits, returns of capital to the extent of petitioner's
basis in his shares, and capital gains as to the remaining
amounts; and (3) the respective petitioners are liable for the
additions to tax and penalty, in amounts to be determined by Rule
155 computations.
FINDINGS OF FACT
The parties have stipulated some of the facts, and the
stipulations of facts and attached exhibits are incorporated in
this opinion. Petitioners Jerome J. and Joanne L. Mancuso
resided in Glenview, Illinois, when they filed their petition in
this case. GAPS and JJM maintained their principal places of
business in Arlington Heights, Illinois, when they filed their
petitions. At all relevant times, petitioner was the sole
shareholder and director and president of both GAPS and JJM,
which were accrual basis taxpayers. Petitioner and Joanne L.
Mancuso are cash basis taxpayers.
Petitioner has been an insurance agent/broker since 1969.
Prior to 1986, petitioner conducted his insurance business as a
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