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Background
Petitioners Paul A. and Marilyn J. Grothues (Mr. Grothues
and Mrs. Grothues) are husband and wife. They resided in San
Antonio, Texas, when they filed the petition in this case.
Between 1971 and 1987, petitioners owned and controlled the
following corporate entities: (1) Southwest Oil Co. of
Jourdanton, Inc. (SWOJ), (2) Southwest Oil Co. of Eagle Pass,
Inc. (SWOEP), (3) Southwest Oil Co. of San Antonio, Inc., (4)
Southwest Propane Co., Inc., (5) Southwest Tire Co., Inc., (6)
P.A.G., Inc., (7) Bridges Petroleum, Inc., (8) End-User’s, Inc.,
and (9) Trux, Inc.
Between 1971 and 1987, petitioners also owned one-third of
the shares of Southwest Slab & Excavation, Inc. (SSAE). The
other shareholders of SSAE included Alan Kanz (Mr. Kanz).
In 1984, petitioners formed Southwest Administrative
Services (SWAS) as a sole proprietorship in order to centralize
the payroll processing for their various corporations. On March
7, 1984, the Internal Revenue Service (the IRS) issued SWAS
employer identification No. (EIN) 74-2302051.
Instead of filing a separate Form 941, Employer’s Quarterly
Federal Tax Return, for each of their corporations, petitioners
combined all their corporations’ employment tax liabilities and
reported them on a single Form 941 under the EIN of SWAS. SWAS
wrote and distributed bimonthly payroll checks to the
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Last modified: May 25, 2011