Neil J. Christal, II & Kathryn E. Christal - Page 9

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          dues and publications expense.  Additionally, Reader's Digest               
          billed Mr. Christal for Condensed Books at his home address.                
          United Sovereigns paid the outstanding bill and claimed the                 
          expense as a dues and publications expense.                                 
               Mr. Christal submitted receipts from restaurants or grocery            
          stores for food purchases as substantiation for United                      
          Sovereigns' office supplies and "promo" expenses.  Additionally,            
          Mr. Christal submitted receipts, which referenced Mrs. Christal,            
          from Matol Botanical International for the purchase of five                 
          bottles worth $35 each as substantiation of United Sovereigns'              
          office expenses.                                                            
               Throughout 1992, $6,900 was withdrawn as petty cash from               
          United Sovereigns' checking account.  Petitioners maintained no             
          record of how that cash was spent.                                          
                                       OPINION                                        
               Petitioners contend that United Sovereigns is a valid                  
          entity, legally independent and separate from Mr. Christal as an            
          individual, and that United Sovereigns and the transactions in              
          which it took part should be respected for Federal tax purposes.            
          Respondent contends that United Sovereigns is a sham, it has no             
          economic substance, and United Sovereigns existed for no purpose            
          aside from being used to obtain tax benefits for petitioners;               
          thus, the income of United Sovereigns is taxable wholly to                  
          petitioners.  We agree with respondent.                                     





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