- 2 -
Held, sec. 6038A, I.R.C., applies to P for the
year at issue. Held, further, P failed to obtain the
authorization of agent required by sec. 6038A(e)(1),
I.R.C. Held, further, R did not abuse her discretion
when she adjusted P's cost of goods sold and NOL under
sec. 6038A(e)(3), I.R.C. Held, further, P may not
deduct the consulting fees as it did not prove that the
expense was ordinary and necessary. Held, further, P
is liable for the accuracy-related penalty.
James E. Merritt, Linda A. Arnsbarger, and Thomas H. Steele,
for petitioner.1
Mary E. Wynne, Michael F. Steiner, and Grace L. Perez-
Navarro, for respondent.
VASQUEZ, Judge: Respondent determined a deficiency in
petitioner's Federal income tax in the amount of $407,592 and an
accuracy-related penalty under section 6662(a)2 of $81,518 for
its taxable year ending April 30, 1991. Although respondent gave
alternative grounds for each adjustment in the notice of
deficiency, her first ground in regard to petitioner's cost of
goods sold and net operating loss was section 6038A(e)(3), which
grants the Commissioner the authority to determine in her sole
discretion the cost of goods sold and expenses arising out of
transactions between a domestic corporation and a related foreign
1 Counsel of record during the trial and briefing of this
case was Martin A. Schainbaum.
2 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011