Lear Eye Clinic, Ltd., et al. - Page 3

                                                    3                                                     
            the Tax Court Rules of Practice and Procedure, unless otherwise                               
            indicated.                                                                                    
                                           FINDINGS OF FACT                                               
                  In this opinion, we incorporate by reference the facts set                              
            out in our opinion in Citrus Valley Estates, Inc. v.                                          
            Commissioner, 99 T.C. 379 (1992).  We set forth and discuss in                                
            this opinion findings of fact arising from the supplemented                                   
            record.  We also incorporate by reference the supplemental                                    
            stipulation of facts.                                                                         
            Lear Eye Clinic, Ltd.                                                                         
                  In 1975, Samuel Pallin (Pallin) commenced practice as an                                
            ophthalmic physician in Phoenix, Arizona.  His practice grew over                             
            the years, offering various medical procedures performed by                                   
            Pallin or other physicians in the practice.  He practiced as a                                
            sole proprietor from 1975 until October 1, 1979.  From sometime                               
            in 1978 through October 1, 1979, the proprietorship employed                                  
            Gerald Walman (Walman) as an associate physician.  On October 1,                              
            1979, Pallin and Walman incorporated Lear Eye Clinic, Ltd.2                                   
            (Lear).  Pallin and Walman owned 51 percent and 49 percent,                                   
            respectively, of the Lear stock.  The administration of the                                   
            medical practice and Pallin's duties and responsibilities did not                             
            change as a result of the formation of Lear.  Nor did the                                     

            2     Pallin and Walman incorporated the Eye Center, Ltd., and                                
            later changed the name to Lear Eye Clinic, Ltd.  For convenience,                             
            the term Lear refers to the Eye Center, Ltd., as well as Lear Eye                             
            Clinic, Ltd., unless otherwise indicated.                                                     




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