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V. Docket No. 4182-96, Edmund J. & June J. Cordes:
A. 1992:
1. Respondent determined petitioners had income from
constructive dividends in the amount of $56,904
for 1992.
a. Petitioners presented no argument regarding
CFC’s earnings and profits for 1992. In
his brief, respondent noted that earnings
and profits at the end of 1990, and
therefore 1992, were dependent on the final
decision in Cordes Fin. Corp. v.
Commissioner, T.C. Memo. 1997-162. The
decision in Cordes Fin. Corp. became final
after the briefs were filed herein. We
leave for the Rule 155 computation the
calculation of CFC’s earnings and profits
and its impact on the treatment of the
constructive dividends.
b. Respondent concedes that, because there
were total credits of $326,930 to account
No. 312 during 1992, petitioner is entitled
to credit that amount against the amount we
conclude petitioner received as
constructive dividends for 1992.
c. Petitioners failed to address a number of
the items respondent determined were
constructive dividends for 1992. We deem
petitioners to have conceded those
adjustments. Petitioners’ arguments are
such that only adjustments pertaining to
the distribution of CFC’s funds to John
Cordes and to the receipt of excess
interest from CFC remain at issue.
2. Respondent determined petitioners were liable for
a penalty for 1992, pursuant to sec. 6662(a), for
substantial understatement of tax. Petitioners
presented no argument regarding the penalty and
concede that, if the Court concludes petitioners
received income in 1992, they are liable for the
penalty to the extent of that income.
B. 1993:
1. Respondent determined petitioners had income from
constructive dividends in the amount of $293,796
for 1993.
a. Petitioners presented no argument regarding
CFC’s earnings and profits for 1993. In
his brief, respondent noted that earnings
and profits at the end of 1990, and
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