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I.R.C., are sustained, subject to recomputation under
Rule 155.
Mike E. Jorgensen, for petitioners.
Charles Baer, for respondent.
MEMORANDUM OPINION
NIMS, Judge: Respondent determined the following
deficiencies, additions to tax, and accuracy-related penalty with
respect to the Federal income tax of petitioners, Raymond K. and
Minerva R. Mason, for the taxable years 1987, 1988, and 1989:
Additions to Tax Penalty
Year Deficiency Sec. 6661 Sec. 6662(a)
1987 $38,236 $9,559 --
1988 36,662 9,166 --
1989 -- -- 1$5,927
______________
1 This figure is equal to 20 percent of the underpayment of
tax previously assessed.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years at issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
After concessions, the remaining issues for decision are:
(1) Whether petitioners received below-market demand loans from
their closely held corporation such that dividends may be imputed
to them in 1987 and 1988 in the amount of the forgone interest
pursuant to section 7872; and (2) whether petitioners are liable
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