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Respondent's determinations for MIC are reflected in a notice of
deficiency dated December 8, 1993, and the determinations for
Beverly are reflected in a notice of deficiency dated June 2,
1994. Respondent's determinations are as follows:
M.I.C. Ltd.: Docket No. 3910-94
Taxable Year Addition to Tax Penalty
Ended Sec. Sec.
January 31 Deficiencies 6651(a)(1) 6662
1990 $349,589 $87,397 $69,918
1991 125,865 31,466 25,173
Beverly Theaters, Inc.: Docket No. 15027-94
Taxable Year Additions to Tax
Ended Sec. Sec.
June 30 Deficiency 6651(a)(1) 6653(a)
1989 $335,744 $95,250 $20,100
Following consolidation of the cases for purposes of trial,
briefing, and opinion, and following concessions by the parties,
the primary issue before the Court is whether any portion of the
$1,837,500 lump-sum award at issue herein must be recognized as
gain by MIC and/or Beverly. The award stemmed from a
condemnation of property that was owned by MIC and leased to
Beverly. We hold that none of the award must be recognized as
gain by MIC or Beverly.
We also must decide the following subsidiary issues:
1. Whether MIC may deduct $65,000 in payments that it made
to James Hafiz ($35,000), Peter Hafiz ($20,000), and Richard
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