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Accuracy-related
Penalty
Year Deficiency Sec. 6662
1995 $244,906 $48,981
1996 333,094 66,619
After concessions by the parties, we must decide whether amounts
paid by petitioners to a related corporation are deductible as
compensation under section 162(a)(1).1 We hold they are.
FINDINGS OF FACT
Many facts were stipulated, and we incorporate by this
reference the parties’ stipulation of facts and the accompanying
exhibits. When the petition was filed, petitioners’ principal
places of business were in Georgia.
1. Petitioners
Petitioners are an affiliated group of corporations, which
filed consolidated Federal income tax returns for 1995 and 1996
using an accrual method of accounting. The group’s parent
corporation is International Capital Holding Corporation (ICHC),
a holding company.
From September 1987 through 1996, the affiliated group
included ICHC and subsidiaries NC Acquisition Corporation (NCAC);
Resort Designs, Inc. (RDI); and Norcom, Inc. ICHC has owned a
controlling interest in NCAC from the time of NCAC’s formation on
1 Unless otherwise indicated, section references are to the
Internal Revenue Code applicable to the subject years. Rule
references are to the Tax Court Rules of Practice and Procedure.
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