2
After concessions by the parties, the issues for decision
are:
(1) Whether payments made to North Carolina and Virginia
resulting from deficiencies in fertilizer products are deductible
ordinary and necessary business expenditures under section 162(a)
or nondeductible fines or penalties under section 162(f). We
hold that the payments are deductible ordinary and necessary
business expenditures under section 162(a).
(2) Whether petitioners have substantiated amounts greater
than the amounts conceded by respondent. We hold that they have
not.
All section references are to the Internal Revenue Code in
effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
FINDINGS OF FACT
Some of the facts are stipulated and are so found. We
incorporate by reference the stipulation of facts and the
attached exhibits.
Petitioners were residents of Tarboro, North Carolina, when
the petition was filed. S. Clark Jenkins (petitioner) owned 50
percent of W.S. Clark & Sons, Inc. (WSC), an S corporation. The
dispute in this case stems from amounts paid by WSC to North
Carolina and Virginia resulting from deficiencies in fertilizer
products and deducted as ordinary and necessary business
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