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and (3) petitioners' personal expenses charged to American
Express and paid by PCCL in the amount of $24,094.
Respondent also determined a deficiency against PCCL. The
adjustments to PCCL were (1) unreported corporate income in the
amount of $14,443; (2) disallowed "Other Deductions" in the
amount of $263,956; (3) a disallowed interest deduction in the
amount of $37,777; and (4) an upward adjustment to "Cost of Goods
Sold" in the amount of $13,770 due to an error on the return.
Petitions were timely filed with this Court by petitioners
and PCCL on June 11, 1997. At that time, petitioners were
residents of Kenner, Louisiana. PCCL, a Louisiana corporation,
had its principal office at Metairie, Louisiana.
In the timely filed answer in each case respondent included
specific allegations in support of the determination that
petitioners and PCCL were liable for a penalty due to fraud.
Respondent alternatively alleged in the answer in each case that
petitioners and PCCL, respectively, were liable for an accuracy-
related penalty for 1993. Additionally, on August 8, 1997, the
cases were sent to the Appeals Division of the Internal Revenue
Service in New Orleans, Louisiana, for consideration.
The cases were calendared for trial at a trial session
commencing March 9, 1998, in New Orleans, Louisiana. Prior to
trial, and after several meetings between the Appeals Office and
petitioners, the cases were settled. Stipulations of settlement
were filed for each docketed case. The stipulations reflected
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