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George K. Reaves and Linda L. Reaves
Additions to Tax
Year Deficiency Sec. 6653(a)(1) Sec. 6661 Sec. 6662
1988 $22,746 $1,137 $5,687
1989 1,148 $230
Following concessions, we must decide the following issues:2
1. Whether Mr. and Mrs. Reaves received constructive
dividends of $93,460 in 1984, $144,287 in 1985, $270,200 in 1986,
and $273,889 in 1987, as respondent contends; $13,814 in 1984,
$19,551 in 1985, $89,150 in 1986, and $68,556 in 1987, as
petitioners contend; or some other amount. We hold that they
received constructive dividends of $93,410 in 1984, $130,551 in
1985, $270,200 in 1986, and $222,982 in 1987.
2. Whether Mr. and Mrs. Reaves are liable for the
additions to tax for fraud under section 6653(b)(1) and (2) for
1984 and 1985 and section 6653(b)(1)(A) and (B) for 1986 and
1987. We hold that they are to the extent stated below.
3. Whether respondent timely issued a notice of deficiency
to Mr. and Mrs. Reaves for 1984 and Reaves Livestock for all of
the years in issue. We hold that respondent did.
4. Whether petitioners are liable for the addition to tax
for substantial understatement of tax under section 6661(a) for
2 Spouses who sign a joint return are jointly liable for the
addition to tax for negligence. See Pesch v. Commissioner, 78
T.C. 100, 128-129 (1982). Mrs. Reaves is liable for the addition
to tax for negligence under sec. 6653(a)(1) for 1988 because Mr.
Reaves concedes liability and, as discussed below at par. F of
the opinion, Mrs. Reaves does not qualify as an innocent spouse
under sec. 6013(e).
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