John H. Hudgens III - Page 4

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               Hugh Z. Graham, Jr. (Mr. Graham), an executive vice-                   
          president of the Columbia, South Carolina, office of STC                    
          described the business of STC as                                            
               65 to 80 -- 65 to 70 percent investment management for our             
               clients.                                                               
                    The rest of the services that we provide are the other            
               fiduciary kinds of things that you would see in a trust                
               company such as bill paying, and report making, and you                
               know, investment, objective-setting, and those kinds of                
               things, like that.                                                     
                    And then, of course, there is the necessity to -- for             
               all the peripheral things, like the fiduciary tax aspects of           
               what we do * * *                                                       
               Mr. Graham further testified that (1) petitioner's duties              
          included account administration and primarily new business                  
          development; (2) all of the principal trust officers performed              
          similar duties; (3) excluding petitioner, none of the principal             
          trust officers were certified public accountants or possessed a             
          master's degree in taxation, and only one other was an attorney;            
          (4) petitioner prepared most of the fiduciary tax returns for the           
          Columbia office; (5) petitioner served as treasurer of STC; and             
          (6) all of the principal trust officers provided some tax advice.           
          Petitioner's description of the duties he performed at STC                  
          generally matched Mr. Graham's; however, petitioner emphasized              
          the tax aspects to a greater extent.                                        
               On his 1990 and 1991 Federal income tax returns petitioner             
          claimed employee business expense deductions for the cost of                
          obtaining his LL.M. degree in the amounts of $11,476 and $13,033,           



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