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uphold the addition to tax for substantial understatement under
section 6661.1
FINDINGS OF FACT
Some of the facts are stipulated and are so found. MIC is a
New Jersey corporation whose principal place of business was
Bloomfield, New Jersey, when it filed its petition.
MIC was incorporated in 1971 as a wholesale ice cream
distributor, with Martin Strassberg (Martin) as its sole
shareholder. MIC was a C corporation from 1971 through 1986. On
December 30, 1986, MIC filed with the Internal Revenue Service a
Form 2553, Election by a Small Business Corporation, which took
effect on November 1, 1987. As a result of the election, the
accounting period of MIC was changed, commencing January 1, 1988,
from an October 31 fiscal year to the calendar year.
Soon after World War II, Arnold, Martin’s father, a high
school mathematics teacher, began a part-time business after
school hours, selling ice cream products wholesale to stores in
Newark, New Jersey. During summer vacations, Arnold expanded his
coverage to small stores and ice cream parlors on the Jersey
Shore. By 1960, Arnold had incorporated his own company,
Arnold’s Ice Cream, and was engaging full time in the wholesale
distribution of ice cream. In the 1960's, Arnold began to
1 All section references are to the Internal Revenue Code in
effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
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