- 2 -
Additions to Tax/Penalties
Year Deficiency Sec. 6661(a) Sec. 6662
1987 $611,053 $152,763 -
1988 672,765 168,191 -
1989 113,278 - $22,656
1990 52,462 - 10,492
Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
The issues for decision are: (1) Whether amounts
petitioners received from two insurance businesses were loans or
were taxable distributions; (2) whether petitioners are entitled
to deduct losses from fishing activities engaged in by Thomas
O’Connell (petitioner) through two S corporations; and
(3) whether petitioners are entitled to a business bad debt or a
nonbusiness bad debt deduction.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioners resided in Chula Vista, California, at the time that
they filed their petition in this case.
During the years in issue, petitioner owned 75 percent of a
corporation named Mayflower Insurance Agency, Inc. (Mayflower).
Petitioner was president of Mayflower and in charge of its
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