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partnership, was converted to a corporate form. In the course of
that change, petitioner was paid 11,750,000 rials and decreased
his ownership share of Diesel Power to less than 50 percent.4 On
his original and amended income tax returns for 1974, 1975, and
1976, petitioner did not report disposition of any interest in
Diesel Power. Petitioner, Mr. Khalatbari, and Diana Khalatbari
were directors of Diesel Power during the years at issue.
Petitioner's brother, I.J. Zand, was also employed by Diesel
Power from 1971 to 1976 as parts director and sales director.
From 1971 to 1976 petitioner owned the land on which the shops,
offices, and warehouse of Diesel Power were located, but he did
not report any rental income therefrom on his 1972, 1973, and
1974 returns. Petitioner sold this land to Diesel Power in 1976
and reported the gain therefrom.
C. Audits for Prior Years
Respondent made adjustments to petitioner's 1958 income for
unreported commissions. The 1958 notice of deficiency indicated
that 40 percent of the commissions earned for two of the items
and 10 percent for one item constituted additional commission
income. Petitioner's Federal income tax returns for the years
1959 to 1961 were also audited. His income for those years was
increased for omitted commissions, again at the 40 percent and 10
percent rates.
4 It appears that petitioner's ownership of Diesel Power was 49 percent.
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