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(2) Whether and to what extent, for the calendar years 1992
and 1993, gross receipts of Ronald D. Ciaravella (Mr. Ciaravella)
in the name of his sole proprietorship, Innovative Advertising
(Innovative), are includable in his gross income as constructive
dividends received from Icarus.
(3) Whether Mr. Ciaravella is entitled to deductions for
expenditures claimed as business expenses on the Innovative
Schedules C for the years 1992 and 1993.
(4) Whether Mr. Ciaravella is liable for the accuracy-
related penalty under section 6662(a) for 1993 due to negligence
or disregard of rules or regulations.
We disallow part of the race car expenditures claimed as
deductions by Icarus, but hold that no amounts paid to Mr.
Ciaravella through Innovative are includable in Mr. Ciaravella's
income as constructive dividends. We further hold that Mr.
Ciaravella is not entitled to deduct business expenses on the
Innovative Schedules C, thereby disallowing the net losses
claimed thereon. Finally, we hold that Mr. Ciaravella is liable
for the accuracy-related penalty for 1993 in an amount equal to
20 percent of the underpayment to be determined under a Rule 155
computation.
FINDINGS OF FACT
Some of the facts have been stipulated and are incorporated
herein by this reference.
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