Labelgraphics, Inc. - Page 2

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          All section references are to the Internal Revenue Code in effect           
          for the years in issue, and all Rule references are to the Tax              
          Court Rules of Practice and Procedure, unless otherwise                     
               After concessions,1 the issues for decision are:                       
               (1) The amount petitioner is entitled to deduct under                  
          section 162 as reasonable compensation to its president Lon                 
          Martin for its year ended June 30, 1990.  We find it is entitled            
          to deduct $406,000.                                                         
               (2) Whether petitioner is liable for an accuracy-related               
          penalty under section 6662(a) and (b)(2) for the year ended June            
          30, 1990, with respect to its claimed deduction for the                     
          compensation to Lon Martin.  We hold that it is not liable for              
          the penalty.                                                                
                                  FINDINGS OF FACT                                    
               Some of the facts and certain documents have been stipulated           
          for trial pursuant to Rule 91 and are found accordingly.  We                
          incorporate the parties' stipulations in this opinion by                    
               Petitioner is an Oregon corporation.  When its petition                
          herein was filed, petitioner maintained its principal office in             
          Portland, Oregon.                                                           

               1Among other things, respondent concedes that petitioner is            
          not liable for an addition to tax under sec. 6661 for its year              
          ended June 30, 1987.                                                        

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