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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
Procedure.
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