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SWIFT, Judge: Respondent determined a deficiency in, an
addition to tax on, and an accuracy-related penalty on
petitioners' 1990 joint Federal income tax as follows:
Accuracy-Related
Addition to Tax Penalty
Deficiency Sec. 6651(a)(1) Sec. 6662(a)
$423,531 $101,585 $84,706
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for 1990, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
All references to petitioner are to Robert A. Stanford.
The issues for decision are whether subpart F income of a
controlled foreign corporation may be reduced by deficits in
earnings and profits of a controlled foreign sister corporation
and whether subpart F income of a controlled foreign corporation
may be reduced by deficits in earnings and profits of a
controlled foreign parent corporation.
FINDINGS OF FACT
Many of the facts have been stipulated and are so found.
During the year in issue, petitioners were U.S. citizens and
resided in Houston, Texas.
In the mid-1980's, favorable laws in the crown colony of
Montserrat, British West Indies, made it relatively easy and
profitable for individuals to establish and to operate private
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