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Associates Ltd. Corp. for James H. Leste's and Richard W. Moore's
purchase of FAMC's stock, and thus nondeductible by FAMC and
taxable as constructive dividends to the individual petitioners, as
respondent contends;
(2) whether all petitioners are liable for the accuracy-
related penalty under section 6662(a) pertaining to the above
issue;
(3) whether the Lestes and the Moores are liable for the
accuracy-related penalty under section 6662(a) for failing to
properly report bonus income received from FAMC on their individual
income tax returns; and
(4) whether FAMC is liable for the accuracy-related penalty
under section 6662(a) for overstating its cost of goods sold by
$202,525 for its fiscal year ended October 31, 1991.
FINDINGS OF FACT
Some of the facts have been stipulated and are found
accordingly. The stipulation of facts and the attached exhibits
are incorporated herein by this reference. At the time of the
filing of the petitions, the Lestes and the Moores resided, and
FAMC's principal place of business was located, in California.
FAMC was incorporated on February 26, 1986; it was a wholly
owned subsidiary of Valentine Associates Limited Corp. (VALC).
VALC was incorporated in 1973 and was engaged in the business of
providing collection and accounting services to mortgage lenders
(loan servicing). At all relevant times, Silbernagel owned all the
stock of VALC and was its president. From 1969 until the time VALC
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