Lenward C. Hood and Barbara P. Hood - Page 1

                                   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                       

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