Ashok C. Shah and Jyoti A. Shah - Page 2




                                       - 2 -                                          
          1989 --  --   --  -- $11,746                                                

          1 Fifty percent of the statutory interest on $18,234, computed from Apr. 15, 1988, to
            the earlier of the date of assessment or the date of payment.             

          All section references are to the Internal Revenue Code in effect           
          for the years in issue.                                                     
               The issues for decision are as follows:                                
               1.  Whether petitioners failed to report capital gain and              
          rental income and overstated depreciation expenses and charitable           
          contributions.  We hold that they did.                                      
               2.  Whether petitioners are liable for section 6653                    
          additions to tax, and a section 6663 penalty, for fraud.  We hold           
          that they are.                                                              
                                  FINDINGS OF FACT                                    
               Petitioners, husband and wife, resided in Kalamazoo,                   
          Michigan, at the time their petition was filed.  During the years           
          in issue, Mr. Shah worked as a scientist, and Mrs. Shah as a                
          research biochemist, for The Upjohn Company (Upjohn).  Upjohn               
          provided petitioners with medical insurance and reimbursed                  
          petitioners' employee business expenses.                                    
               Petitioners were involved in real estate activities.  They             
          jointly owned and managed two rental properties.  Petitioners               
          also owned a vacant lot, which they purchased in 1984 for                   
          $16,000.  Petitioners, in 1986, sold the lot on an installment              
          basis for $26,000 and, in 1987, received a $17,693 payment.                 






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