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petitioners’1 Federal income taxes:
Taxable Period Additions to Tax
Petitioners Ending Deficiency Sec. 6653(b) Sec. 6661
Compact 03/31/85 $23,783 $11,892* $5,946
Equipment Co. 03/31/86 247,334 123,667* 61,834
05/31/86 33,609 16,805* 8,402
Bernard and 12/31/85 209,313 104,657* 52,328
Carol Atkinson 12/31/86 124,851 93,638* 31,213
* Plus 50 percent of interest due on portion of
underpayment of tax attributable to fraud.
Unless otherwise noted, 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.
After concessions, the issues for decision are: (1) Whether
Compact Equipment Co. (petitioner) underpaid its taxes by
deducting various payments (made on behalf of its president) as
compensation expenses; (2) if petitioner underpaid its taxes,
whether the 3-year statute of limitations under section 6501(a)
bars respondent from assessing and collecting the underpayment of
tax; (3) whether petitioner is liable for fraud additions to tax
under section 6653(b); (4) whether Bernard and Carol Atkinson
(Atkinsons) are liable for fraud additions to tax under section
6653(b); and (5) whether petitioners are liable for an addition
to tax for substantial understatement of tax pursuant to
1 References to petitioners are to Compact Equipment Co.,
Bernard Atkinson, and Carol Atkinson.
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Last modified: May 25, 2011