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notices of deficiency were issued and the petition was filed, as
well as for costs incurred thereafter, we consider petitioner's
motion as a motion for administrative and litigation costs.
Background
Petitioner and Wanda M. Dugan are husband and wife who filed
joint Federal income tax returns for the years 1988 and 1991.
They resided in Greenbrier, Tennessee, at the time the petition
was filed.
From 1986 until the fall of 1990, Mrs. Dugan owned and
operated Nanna's Treasures, a sole proprietorship through which
she designed, produced, and offered for sale ornate party and
pageant apparel and accessories for young women. On September 5,
1990, Mrs. Dugan incorporated Nanna's Treasures, Inc. (NTI) with
the assistance of Kelly Frey, an attorney. The corporation was
organized to continue the business of Nanna's Treasures. Mrs.
Dugan was NTI's sole shareholder. NTI did not conduct any
business until January 1, 1991. Sometime prior to March 15,
1991, a Form 2553, Election by a Small Business Corporation, was
prepared by Mr. Frey, and signed by Mrs. Dugan as the sole
shareholder and president of NTI. On the Form 2553 Pamela
Tidwell, a certified public accountant, was listed as the
corporate officer or legal representative to be "called for
information" in connection with the election. Ms. Tidwell was
the accountant for the Dugans and NTI during the relevant
periods, but she was not an officer of NTI, nor had she been
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