Thomas R. and Margaret Kennedy - Page 2

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            Background                                                                                    
                  Petitioners resided in Winter Haven, Florida, when they                                 
            petitioned the Court.  This case is part of respondent's tax                                  
            shelter litigation project entitled "Scheer".  The Scheer project                             
            involves a partnership organized by Lawrence Scheer to purchase                               
            and market video tapes.  By notices of deficiency dated August 2,                             
            1988, respondent determined deficiencies in, additions to, and                                
            increased interest on petitioners' Federal income tax as                                      
            follows:1                                                                                     
                             Additions to Tax and Increased Interest                                      
            Year Deficiency  Sec. 6653(a)(1)  Sec. 6653(a)(2)  Sec. 6659  Sec. 6621(c)                    
            1981  $10,316.29   $ 515.82          1            $1,956.70      2                            
            1982  7,663.00     383.15            1            2,298.90       2                            
                  1 50% of the interest due on the deficiency.                                            
                  2 120% of the interest payable under sec. 6601.                                         
                  In the stipulation, petitioners agreed to be bound by the                               
            test case entitled Pinto v. Commissioner, docket No. 17407-86.                                
            This Court entered a decision in the Pinto case on January 18,                                
            1995.  The stipulation provides:                                                              
                        With respect to all adjustments in respondent's                                   
                  notice of deficiency relating to the Scheer Project tax                                 
                  shelter, more specifically, the limited partnership                                     
                  entitled Richard II, Ltd., the parties stipulate to the                                 
                  following terms of settlement:                                                          
                        1.  THE ABOVE ADJUSTMENTS ARE THE ONLY ISSUES IN                                  
                  THIS CASE WITH RESPECT TO ALL PARTIES;                                                  


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




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