Edward E. and Constance M. Thorpe - Page 4

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          (8) to the extent various expenses deducted by ETCO are                     
          disallowed, must the expenses then be characterized as                      
          constructive dividends received by Mr. and Mrs. Thorpe; and (9)             
          whether ETCO and Mr. and Mrs. Thorpe are liable in the years at             
          issue for accuracy-related penalties pursuant to section 6662.2             

                                  FINDINGS OF FACT                                    

               Some of the facts have been stipulated and are so found.               
          The stipulation of facts, second stipulation of facts, and                  
          stipulation of settled issues are incorporated herein by this               
          reference.  At the time the petitions were filed, Mr. and Mrs.              
          Thorpe resided in Silver Spring, Maryland, and ETCO's principal             
          place of business was located in Kensington, Maryland.                      
               During the years in issue, Edward Thorpe was the chief                 
          executive officer of ETCO.  Mr. Thorpe owned 100 percent of the             
          shares of ETCO.  ETCO was incorporated on May 6, 1982, and became           
          engaged in a specialized type of contracting, which principally             
          involved interior renovation of kitchens and bathrooms in public            
          housing.  Constance Thorpe was the chief financial officer of               
          ETCO.  Mrs. Thorpe was responsible for the financial aspects of             
          ETCO including accounts receivable, accounts payable, payroll,              
          and insurance.  The remaining officers of ETCO included Mr. Ron             

               2Unless otherwise indicated, 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              

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