- 2 -
an accuracy-related penalty on Federal income tax for individual
petitioners Don and Cecilia Chan as follows:2
Accuracy
-related
Additions to Tax Penalty
Sec. Sec. Sec. Sec. Sec.
Year Deficiency 6653(a)(1) 6653(a)(1)(A) 6653(a)(1)(B) 6661 6662(a)
1987 $934,911 --- $46,746 1 $61,350 ---
1988 708,273 $35,414 --- --- 30,992 ---
1989 693,857 --- --- --- --- $14,667
1 50 percent of the interest due on the portion of the underpayment
attributable to negligence.
Respondent determined deficiencies in and additions to
Federal income tax for corporate petitioner Eastimpex for the
taxable years ending March 31, 1988 and 1989, as follows:
Additions to Tax
Sec. Sec. Sec.
Year Deficiency 6653(a)(1)(A) 6653(a)(1)(B) 6661
1988 $766,321 $38,316 1 $191,580
1989 815,234 --- --- 203,809
1 50 percent of the interest due on the portion of the underpayment
attributable to negligence.
After concessions, the issues for decision are: (1) Whether
certain payments by corporate petitioner Eastimpex to its related
supplier were costs of goods sold, (2) whether individual
petitioners realized constructive dividends from Eastimpex, (3)
whether individual petitioners are liable for additions to tax
under sections 6653 and 6661 for 1987 and 1988 attributable to
2 All section references are to the Internal Revenue Code in
effect for the taxable years in issue, and all Rule references
are to the Tax Court Rules of Practice and Procedure, unless
otherwise designated.
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