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MEMORANDUM FINDINGS OF FACT AND OPINION
GERBER, Judge: Respondent, by means of a statutory notice
of deficiency, determined the following income tax deficiencies
and section 6662(a)1 penalties with respect to petitioners:
William J. and Sandra D. Heitz
Penalty
Year Deficiency Sec. 6662
1992 $31,592 $6,318
1993 43,283 8,657
Exacto Spring Corp.
Year Penalty
Ended Deficiency Sec. 6662
5/31/93 $868,886 $173,777
5/31/94 686,940 137,388
These two cases were consolidated for trial, briefing, and
opinion.2 After concessions, the issues for our consideration
are: (1) The amount that Exacto Spring Corp. (Exacto) is
entitled to deduct as reasonable compensation to William Heitz
for its taxable years ending May 31, 1993 and 1994; (2) whether
Exacto is liable for accuracy-related penalties with respect to
the claimed deductions for the compensation to William Heitz; (3)
whether William and Sandra Heitz constructively received interest
income of $87,056 and $106,903 for the taxable years 1992 and
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years under
consideration, and all Rule references are to this Court's Rules
of Practice and Procedure.
2 Unless otherwise indicated, all references to petitioner
are to Exacto Spring Corp.
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Last modified: May 25, 2011