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$1,078,177. Additions to tax for fraud were determined in the
related notices of deficiency and affirmatively pleaded in the
answers to the petitions for taxable periods ended 1973 through
1979. By agreement of the parties, decisions were entered
wherein deficiencies in tax for taxable periods ended 1975
through 1981, aggregating $164,626, were sustained, but additions
to tax for fraud were not sustained for any taxable period at
issue.
In the notices of deficiency sent to FIP for years ended
1975 through 1981, respondent disallowed as unreasonable
compensation deductions claimed for moneys FIP paid to Ms.
Walters on the basis that Ms. Walters "performed no more than
nominal services" for FIP. In those notices of deficiency
respondent also disallowed as unreasonable a portion of the
compensation FIP paid to Mr. Gherman. During 1984, Ms. Walters
asked Mr. Gherman to remove her from FIP's payroll, because she
wanted to avoid future problems with the IRS.
Another issue in those Tax Court cases related to activities
in marketing tax shelters (film and art) to FIP's clients. Ms.
Walters participated to some degree in setting up or putting
together at least one tax shelter, but the record does not show
the extent of that participation. Respondent also disallowed
some business expenses claimed by FIP in the notices of
deficiency for years ended 1973 through 1981. Unreported income
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Last modified: May 25, 2011