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for lack of prosecution. The sole matter for decision is
respondent’s motion for imposition of a section 6673 penalty.
Background
At the time the petition was filed, Joseph J. Lipari and
Eileen H. Lipari resided in Cottonwood, Arizona.
Petitioners have admitted that, during 1993, Mr. Lipari
performed services as a chiropractor. Nonetheless, petitioners
failed to report a large percentage of the income from such
activity on their 1993 income tax return. Petitioners claimed
that such income was earned by and taxable to an entity called
D.D. Trust (the Trust).2 Respondent determined that the income
reported by the Trust is properly taxable to Mr. Lipari
individually on the grounds that the Trust is a sham (i.e., lacks
economic substance) that should be disregarded for tax purposes.
Respondent alleged alternatively that, if the Trust were
respected for tax purposes, the Trust constitutes a grantor trust
whose income is taxable to petitioners.
Discovery for October 1998 Trial
This case was originally calendared for the Court’s trial
session in Phoenix, Arizona on October 19, 1998. In preparation
for trial and as required by Rule 70(a), respondent first
2 Although petitioners alleged that they enjoyed no
interest in property which was transferred to the Trust,
petitioners admitted to receiving a life tenancy to all property
owned by the Trust and further to having use of the real and
personal property owned by the Trust.
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Last modified: May 25, 2011