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must compute its income and expense on the cash receipts and
disbursements method (cash method) rather than an accrual method,
and respondent changed petitioner's method of accounting
accordingly. The resulting deficiencies in tax and additions to
tax are as follows:
Year ended Additions to tax Penalty
April 30 Deficiency Sec. 6651(a)(1) Sec. 6662(a)
1990 $107,136 $27,454 $21,427
1991 73,366 22,667 14,673
After concessions by the parties, we decide the following issues:
1. Whether petitioner may deduct unpaid accrued wages of
$200,000 and $18,250 for taxable years ended April 30, 1990 and
1991, respectively. We hold it may not.
2. Whether petitioner is liable for penalties for negligence
determined by respondent under section 6662(a). We hold it is.
Unless otherwise stated, section references are to the
Internal Revenue Code in effect for the years in issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
Background
All facts have been stipulated and are so found. The
stipulations and attached exhibits are incorporated herein by
this reference. Petitioner's principal place of business was in
Troy, Michigan, when it petitioned the Court. During all
relevant times, F. Douglas Forier (F. Forier) owned 100 percent
of petitioner's outstanding stock, and F. Forier, Margaret Forier
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