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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.
FINDINGS OF FACT
At the time that the petitions were filed, Bob J. and
Ernestene Sams (the Samses) resided in Tulsa, Oklahoma. Carter
Bonding had its principal place of business in Tulsa, Oklahoma.
Sherri Lynn Sullivan (Sullivan) resided in Broken Arrow,
Oklahoma.
Carter Bonding was in the bail bond business during 1994 and
1995. The stock of Carter Bonding was owned by Ernestene Sams
(Sams), who was the president of Carter Bonding, and by Sullivan,
who was the vice president of Carter Bonding. Sullivan is the
daughter of the Samses.
Sams and Sullivan wrote bonds in 1994 and 1995 for Carter
Bonding. However, most of the bonds written during those years
were written by Sullivan because Sams was sick. Sams conducted
business for Carter Bonding primarily over the telephone and did
not go into the office much during those years.
Carter Bonding charged a fee, or bond premium, in an amount
that was up to 15 percent of the face amount of the bail bond,
for the service of writing the bail bond. Depending on the
circumstances of the particular client, Carter Bonding received
full, partial, or no payment of the bond premium at the time the
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