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1994, and $445,000 in 1995, based on the following amounts of
reasonable compensation:
Year Isidore Klein Steven Klein Total
1993 $200,000 $300,000 $500,000
1994 200,000 300,000 500,000
1995 5,000 440,000 445,000
2. Whether petitioner is liable for the accuracy-related
penalty under section 6662 for substantial understatement of tax
for 1993, 1994, and 1995. We hold that it is for 1993 and 1994,
but not for 1995.
Section references are to the Internal Revenue Code in
effect during the years in issue. Rule references are to the Tax
Court Rules of Practice and Procedure.
I. FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioner is a corporation the principal office of which
was in Port Washington, New York, when it filed the petition.
A. The Kleins
Isidore Klein was born in 1913. He is married to Gertrude
Klein. He was a baker and taught baking at a vocational high
school in New York. He also manufactured small metal products
that he used in his baking business.
Steven Klein was born in 1942. He is the son of Isidore and
Gertrude Klein.
B. Formation of Petitioner
Petitioner manufactures and sells small implements and metal
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