Stephen D. Pahl and Louise A. Pahl - Page 1

                                 T.C. Memo. 1996-176                                  

                               UNITED STATES TAX COURT                                

                 STEPHEN D. PAHL AND LOUISE A. PAHL, Petitioners v.                   
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 7757-94.                  Filed April 11, 1996.             

                    Petitioner husband (P), an attorney, claims that                  
               he was not a shareholder in an S corporation organized                 
               for the practice of law.  P did not report any of the                  
               income and other items of the S corporation; he also                   
               received an item of nonemployee compensation from the                  
               S corporation, which he claimed he did report.                         
                    1.  Held:  P was a shareholder of the S corporation               
               for the taxable year in issue and must report his pro                  
               rata share of the income and other items of the                        
               S corporation.                                                         
                    2.  Held, further, P failed to report the                         
               nonemployee compensation.                                              
                    3.  Held, further, R’s imposition of an accuracy-                 
               related penalty for negligence under sec. 6662, I.R.C.,                
               is sustained.                                                          

               Stephen D. Pahl, for petitioners.                                      
               Alan D. Hill, for respondent.                                          

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