Respondent determined a deficiency in petitioner's 1993
Federal income tax in the amount of $4,422, an addition to tax
under section 6651(a) in the amount of $3, and an accuracy-
related penalty under section 6662(a) in the amount of $884.
The issues for decision are: (1) Whether petitioner is
entitled to a deduction for a loss from an S corporation; and
(2) whether the understatement, if any, of tax required to be
shown on petitioner's 1993 Federal income tax return was due to
his negligence or disregard of rules or regulations. The
resolution of the first issue depends upon whether a valid S
corporation election was filed by the corporation to which the
loss is attributable.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioner filed an untimely Federal income tax return for the
year 1993, on May 6, 1994. At the time the petition was filed,
he resided in Westlake, Ohio.
In 1992 petitioner established and incorporated under Ohio
law Fankhauser Management, Inc. (Management). Petitioner was the
sole shareholder of Management during all relevant periods.
Management was formed in order to operate a teenage activity
center. Although there is conflicting evidence on the precise
date, it appears that the business of Management began in January
1993.
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