T.C. Memo. 1999-282
UNITED STATES TAX COURT
LAW OFFICES--RICHARD ASHARE, P.C., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18439-97. Filed August 24, 1999.
P is a corporate law firm, and A is its sole
shareholder and only professional employee. P has
represented a class of plaintiffs from 1974 to date and
was awarded $12,567,623 in legal fees when the case was
settled in 1989. P received those fees from 1989
through 1992 and is not entitled to further fees for
significant ongoing services which it must perform on
that case. P's workload in and after 1990 was minimal,
except for the ongoing services. P paid A $10,492,500
of "compensation" from 1989 through 1992 and, for each
year but one, reported no taxable income. For 1990 P
reported taxable income of $3,775,699; $2,487,547 was
retained for P's future operations, and $1,282,998 was
retained to pay P's 1990 Federal income tax liability.
P paid A $1,750,000 of "compensation" during 1993 and
reported a $1,857,933 loss that it carried back to 1990
to claim a refund of $581,812. P borrowed $916,756
from A and sold most of its assets to have the funds to
pay A the $1,750,000. Exclusive of $1,373,913 of
Federal income tax refunds received or accrued by P on
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