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Following a concession by respondent, we must decide: (1)
Whether petitioner is entitled to deduct all of its claimed
expenses; and if not, (2) whether petitioner is liable for the
section 6662(a) accuracy-related penalty.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The
stipulation of facts and the attached exhibits are incorporated
herein by this reference.
The record before us is incomplete; nonetheless, we have
attempted, as best we can, to ascertain the facts necessary to
resolve the issues before us.
Background
Petitioner (or JRJ), a California corporation, was formed in
1988 by Jose F. Leon (J.F. Leon), its sole shareholder. J.F. Leon
was born in Guatemala in 1948, the third oldest brother in a family
of 12. He came to the United States in 1968 after family
infighting, and subsequently became a U.S. citizen. One of J.F.
Leon's brothers, Jose E. Leon, is an officer of JRJ.
At all relevant times petitioner maintained its principal
place of business in Los Angeles, California. JRJ timely filed its
Federal income tax return for tax year ended April 30, 1993 (the
year in issue).
Petitioner's Business--"Outbound Deliveries"
Petitioner is in the courier business, delivering letters and
small packages from the United States to Guatemala. During the
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