6
understood that the other partners to GTWP were corporations;
namely, Wright S Corp. and Trainer S Corporation. Mr.
Grigoraci’s attorney advised him that he should not become a
member of the partnership in his individual capacity because he
would be the only partner in GTWP with unlimited liability. To
avoid being the only noncorporate partner in GTWP, Mr. Grigoraci
formed Victor Grigoraci, CPA, Accounting Corporation (Grigoraci S
Corporation) in or about November 1995. It was Mr. Grigoraci’s
intention that Grigoraci S Corporation join GTWP as a partner.
During 1996, Mr. Grigoraci was the sole shareholder,
president, and treasurer of Grigoraci S Corporation. Mrs.
Grigoraci was the corporation’s secretary, but she did not
perform any work for the corporation as an employee. Mr.
Grigoraci's personal secretary maintained the books and records
of the corporation. During 1996, the office of Grigoraci S
Corporation was the same as GTWP’s.
GTWP reported on its income tax return for 1996 ordinary
income of $197,773. On a Schedule K-1 for 1996, GTWP reported
that the Grigoraci S Corporation’s distributive share was
$106,799. Grigoraci S Corporation reported on its 1996 Federal
income tax return the distributive share from GTWP and other
income of $21,862. The record does not disclose the source of
this other income. After deductions, including a salary of
$32,000 to Mr. Grigoraci, Grigoraci S Corporation reported that
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