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All section references are to the Internal Revenue
Code of 1986 as amended and in effect during the years in
issue. All Rule references are to the Tax Court Rules of
Practice and Procedure. References to petitioner are to
Phillip M. Welch.
After concessions, the issues for decision are:
(1) Whether petitioners are entitled to deduct payments
made pursuant to an agreement between petitioner and
Mr. A.C. Rahill, under which Mr. Rahill transferred his
accounting practice to petitioner, on the theory that the
payments represent the amortized cost of a covenant not to
compete or a client list; and (2) whether petitioner is
liable for the accuracy-related penalty determined by
respondent pursuant to section 6662(a).
FINDINGS OF FACT
At the time petitioners filed the instant petition,
they resided in Oklahoma City, Oklahoma. Petitioners were
husband and wife during 1989 and filed a joint Federal
income tax return for that year. They separated during
1990, and petitioner filed a separate return for that year.
Petitioners used the cash receipts and disbursements method
of accounting to report income and expenses on both
returns.
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