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Accuracy-Related
Addition to Tax Penalty
Year Deficiency Sec. 6651(a) Sec. 6662(a)
1988 $ 502 -- --
1989 4,148 $1,058 --
1990 9,335 -- $1,871
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure. All references to petitioner are to Kent Jensen.
The issue for decision is whether petitioners are entitled
either to a section 166 business bad debt deduction with respect
to $128,841 that was transferred to petitioners’ closely held
corporation or to a section 1244 ordinary loss deduction in the
same amount with respect to the stock of petitioners’ closely
held corporation.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
When the petition was filed, petitioners resided in Centerville,
Utah.
On July 23, 1984, petitioners organized K&C Industries (K&C)
as a corporation to market and sell artificial fingernails.
Petitioner served as president and treasurer of K&C, and Carol
Jensen served as vice president and secretary of K&C.
At the time of K&C's formation, petitioners contributed to
K&C $5,882 in cash, office furniture, and a computer system.
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