115 T.C. No. 14
UNITED STATES TAX COURT
LENWARD C. HOOD AND BARBARA P. HOOD, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
HOOD’S INSTITUTIONAL FOODS, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 4160-97, 4161-97. Filed August 25, 2000.
H operated a sole proprietorship, and later
incorporated HIF, which assumed the business of the
sole proprietorship. H was sole shareholder and
president, and indispensable to the success, of HIF.
After HIF was incorporated, H was indicted and tried
for criminal tax evasion and false declaration arising
from the alleged failure to report income from the sole
proprietorship. HIF paid legal fees for H’s defense of
the criminal charges.
Held, the facts of the instant cases are not
materially distinguishable from the facts of Jack’s
Maintenance Contractors, Inc. v. Commissioner, T.C.
Memo. 1981-349, revd. per curiam 703 F.2d 154 (5th Cir.
1983). In light of the reversal by the Court of
Appeals for the Fifth Circuit, we reconsider our
holding.
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