Rameau A. and Phyllis A. Johnson - Page 1


                                          108 T.C. No. 22                                             

                                     UNITED STATES TAX COURT                                          

                 RAMEAU A. AND PHYLLIS A. JOHNSON, ET AL.,1 Petitioners v.                            
                        COMMISSIONER OF INTERNAL REVENUE, Respondent                                  

                  Docket Nos. 16038-93, 16039-93,         Filed June 16, 1997.                        
                              17007-93, 14430-94.                                                     
                        Ds sold multiyear vehicle service contracts                                   
                  (VSC's) in connection with the sale of motor vehicles                               
                  under a common program administered by A, an unrelated                              
                  party.  Under the terms of the program, Ds retained a                               
                  portion of the contract price as their profit and                                   
                  remitted the remainder to A:  (1) For deposit of a                                  
                  specified amount in escrow to fund their obligations                                
                  under the VSC, and (2) for payment of A's fees and a                                
                  premium for excess loss insurance provided by an                                    
                  unrelated insurance company.  Ds currently included in                              
                  gross income only the portion of the contract price                                 
                  that they retained as profit.  Ds reported amounts held                             
                  in escrow only when released to them.                                               

                  1 Cases of the following petitioners are consolidated                               
            herewith:  Thomas R. and Karon S. Herring, docket No. 16039-93;                           
            DFM Investment Co., docket No. 17007-93; and David F. and                                 
            Barbara J. Mungenast, docket No. 14430-94.                                                

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