Charles B. and Teresa A. Thompson, et al. - Page 3

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          Alexa Olson, A Minor, Kimberly Olson, Legal Conservator--docket             
          No. 16945-95                                                                
               Year           Deficiency                                              
               1990           $3,195                                                  
          Bruce A. and Kimberly A. Olson--docket No. 16946-95                         
               Year           Deficiency                                              
               1990           $55,679                                                 
               Respondent conceded the accuracy-related penalty in docket             
          No. 16787-95, and petitioner in docket No. 5220-95 has not                  
          argued, and thus conceded, the FSAA adjustment decreasing State             
          Supply's sales promotion deduction for 1989.  The sole issue for            
          decision therefore is whether State Supply may amortize $2.5                
          million, or some lesser amount, for covenants not to compete.               
                                  FINDINGS OF FACT                                    
               State Supply was incorporated under the laws of the State of           
          Oklahoma on October 14, 1963.  At the time of the filing of its             
          petition, State Supply's principal place of business was Tulsa,             
          Oklahoma.  During the taxable year 1989, State Supply was a                 
          corporation which elected to be taxed for Federal income tax                
          purposes under the provisions of Subchapter S of the Internal               
          Revenue Code of 1986, as amended.  For the taxable year 1989,               
          State Supply is controlled by the TEFRA notice and assessment               
          procedures provided by sections 6241-6245.  Douglas J. Von Allmen           
          was the tax matters person for 1989.  During the taxable year               
          1989, the shareholders of State Supply were Douglas J. and Linda            
          L. Von Allmen, Bruce A. and Kimberly A. Olson, Charles B. and               



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