- 24 -
demonstrated that it supplied adequate information to A & F
regarding any of these items, nor that any portion of those
deficiencies was the result of an error on the part of A & F.
Thus for the taxable year ended July 31, 1989, some part of the
deficiency was attributable to negligence and the negligence
addition applies to the entire underpayment; for the taxable year
ended July 31, 1990, the negligence penalty also applies to the
portions of the underpayment attributable to the depreciation and
rental expense items as well as to the $88,181 gross receipts
item.10
However, most of the adjustments in the notice of deficiency
flowed from the fact that respondent combined the gross receipts,
costs of sales, interest income, and other deductions of
petitioner and No. 2. The Court is satisfied that when Berry
organized No. 2 he had to have had legal advice and assistance to
do so, and, with the organization of No. 2, filing separate
corporate returns flowed as a natural consequence. No. 2 really
only filed one return, the one for its taxable year ended April
30, 1990; the one for its taxable year ended April 30, 1991, just
reported a few deduction items totaling $29,446. In its petition
to this Court, petitioner acting through its present counsel
asserted that it and No. 2 were separate corporations and that
10 In each instance the Court means "underpayment" as
properly defined in sec. 6653(c) and sec. 6664, respectively. We
note that No. 2 reported tax of $7,165 on its return filed for
FYE 4-30-90 that respondent apparently has not taken into
consideration in computing the negligence addition (penalty).
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011