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accuracy-related penalty under section 6662(a).2 The issues for
decision are: (1) Whether petitioners in 1996 had unreported
wagering gains in excess of wagering losses, and if so, the
amount of the excess gains; and (2) whether petitioners are
liable for a penalty under section 6662(a) for substantially
understating their 1996 income tax.
FINDINGS OF FACT
The parties have stipulated some facts, which we incorporate
herein by this reference. When they petitioned the Court,
petitioners, husband and wife, resided in Slidell, Louisiana.
During 1996, petitioner husband (Ronald) was president and
part owner of Mega International, Inc. (Mega), an S corporation
which operated an offshore oil field business.3 During 1996,
Ronald earned $80,000 in wages from Mega. During 1996,
petitioner wife (Paula) did not work outside the home. Although
Paula was not employed by Mega and otherwise provided no services
to Mega, during 1996 she also received $24,000 from Mega, which
reported the payments to her on a 1996 Form W-2, Wage and Tax
Statement, as wages, tips, or other compensation.
2 Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
3 Unaudited financial statements admitted into evidence
indicate that petitioners owned 49 percent of Mega International,
Inc. (Mega). The record otherwise contains no information about
the ownership of Mega.
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