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generally denied all of petitioners' allegations of error and
facts related thereto.
On March 22, 1996, Mr. Lipton met with one of respondent's
revenue agents. At this meeting, Mr. Lipton presented some
documents to attempt to substantiate petitioners' entitlement to
the disputed deductions. Following this meeting, the revenue
agent concluded that the expenditures had been made, but that
petitioners had not shown that the expenditures were business
related.
The Court called this case for trial in San Francisco,
California, on June 3, 1996. Mr. Lipton appeared on behalf of
petitioners, and respondent was represented by her counsel. The
parties' counsel reported to the Court that the case was ready
for trial, and the Court set the trial for June 7, 1996. On
June 6, 1996, the parties' counsel appeared before the Court and
notified the Court that they had settled their differences.
Counsel read the terms of the settlement into the record, and, on
October 15, 1996, the Court filed the parties' stipulation of
settled issues (Stipulation). As stated in the Stipulation,
petitioners agree to report the $21,025 of wages reported on the
Form W-2 issued by EP Management Services, Inc., and they agree
that they are liable for an accuracy-related penalty under
section 6662(a). Respondent agrees that petitioners are entitled
to a $5,211 prepayment credit for Federal withholding on the
wages (including $306 that is attributable to excess Medicare
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