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are: (1) Whether certain payments made by petitioner to, or on
behalf of, Mr. Henderson should be recharacterized as wages
subject to Federal employment taxes; (2) whether petitioner is
liable for the additions to tax under section 6656; and
(3) whether petitioner is liable for the penalties under section
6662(a).
Some of the facts in this case have been stipulated and are
so found.
Petitioner is an S corporation that was incorporated in
North Carolina on or about May 7, 1991. At the time the petition
was filed, petitioner’s principal place of business was in
Raleigh, North Carolina. Petitioner operates a brokerage/real
estate company that is the sole source of its income. Since
petitioner’s incorporation and all during 1995 and 1996, Mr.
Henderson has owned 100 percent of petitioner’s stock and has
been the president of petitioner.
Mr. Henderson worked approximately 32 hours per week for
petitioner during 1995 and 1996. During the years in issue, Mr.
Henderson performed many services for petitioner. Mr. Henderson
negotiated with sellers of real property, reviewed development
budgets, reviewed development progress, assisted in the
negotiation of sales of lots to residential builders, reviewed
financial operations, arranged financing for joint ventures,
assisted in organizing and setting up development entities,
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