Shigenori Kudo and Motomi Kudo, et al. - Page 9

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               (3)  Whether Toraya is entitled to claim or treat as cost of           
          goods sold the payments made to Joan Takao (Joan) and Junichi               
          Takao (Junichi) in the amounts of $27,000 to Joan in 1988, and              
          $7,100 to Joan and $4,000 to Junichi in 1989.  We hold that it is           
          entitled to claim them to the extent decided herein.                        
               (4)  Whether Toraya is entitled to claim as cost of goods              
          sold $19,917 in 1989, representing the beginning inventory                  
          balance of a restaurant Toraya closed that year.  We hold that it           
          is to the extent decided herein.                                            
               (5)  Whether Toraya is liable for an addition to tax for               
          late filing under section 6651(a) for 1988.6  We hold that it is.           
               (6)  Whether Toraya is liable for an addition to tax for               
          negligence under section 6653(a)(1) for 1988, and accuracy-                 
          related penalties under section 6662(a) for 1989 through 1991.              
          We hold that it is.                                                         
               (7)  Whether Toraya is liable for an addition to tax for               
          substantial underpayment of tax under section 6661 for 1988.  We            
          hold that it is.                                                            
               (8)  Alternatively, if the Court determines that Toraya had            
          unreported income from unreported sales, whether it is entitled             
          to theft loss deductions for 1988 through 1991.  We hold that it            
          is not.                                                                     


               6  Respondent conceded on opening brief that Toraya is not             
          liable for a late filing addition under sec. 6651(a)(1) for 1989.           





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