- 36 -
Young & Young reported its operations for Federal income tax
purposes on a calendar year, and it used the cash receipts and
disbursements method on its relevant Federal income tax returns.
These returns reported the following information:
1988 1989 1990 1991 1992
Total income $440,673 $571,125 $672,543 $622,323 $639,859
Compensation of officers 164,000 327,000 450,000 315,000 367,000
Salaries & wages 86,551 36,600 42,656 23,247 - 0 -
Pension, profit-sharing, plans 73,462 77,769 93,556 160,351 102,506
Employee benefit programs 17,368 56,230 6,761 9,418 5,425
Taxable loss 2,444 12,549 24,327 20,945 1,875
Of the reported compensation, Howard Young received $111,500,
$163,500, $225,000, $167,500, and $166,000 during the respective
years.
The Youngs filed timely a joint 1989 Federal income tax
return. On January 7, 1994, the Commissioner mailed them a
notice of deficiency reflecting a determination that the Youngs'
1989 taxable income was increased by $50,030 on account of a
taxable transfer of property from Young & Young under section 83.
The notice also stated that the Youngs were liable for a $2,802
accuracy-related penalty under section 6662(a) because the
underpayment of tax was due to negligence.
On the same day, the Commissioner mailed Young & Young a
notice of deficiency reflecting a determination that its 1989
taxable income was increased by $50,030 because its contribution
to the Trust was governed by subpart D.11 Young & Young had
11 Subpart D refers to subpart D of subchapter D of chapter
(continued...)
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