- 11 - The sale of the business under the June 3 and 5, 1992, purchase agreement closed on or about October 30, 1992. BDC incurred and deducted $107,815 for expenses of the sale transaction. C. Notices of Deficiency In the notice of deficiency issued to BDC, respondent determined, among other things, that BDC failed to report $1.2 million of income received from Bravo.6 Alternatively, if the allocations should be upheld, respondent determined that the selling expenses incurred by BDC were improperly allocated, and these expenses attributable to the consulting agreement and covenant (59.48 percent) are a constructive dividend to Mr. Langdon and not deductible by BDC. The notice of deficiency issued to the Langdons was consistent, determining that 59.48 percent of selling expenses is a constructive dividend to Mr. Langdon. Shortly before the trial in the instant cases, respondent conceded that Mr. Langdon's consulting agreement with Bravo had a value of $200,000. At trial and on brief, respondent conceded that the covenant had a value of $121,000. 6The Langdons reported and paid personal income tax on the $1.2 million, in keeping with the purchase agreement allocation.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011