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pass-through item from Petito Corp.
On December 29, 1999, respondent issued to petitioner a
notice of deficiency. In the notice, respondent determined a
deficiency of $30,490 in petitioner’s income tax for 1992, an
addition to tax under section 6654 of $1,330, and an accuracy-
related penalty for fraud under section 6663 of $22,868. The
deficiency was attributable in part to respondent’s determination
that petitioner failed to report his share of income from Petito
Corp.
Petitioner filed a timely petition contesting the notice of
deficiency described above. After respondent filed an answer to
the petition, petitioner filed a motion to dismiss the case on a
variety of grounds, including allegations that the notice of
deficiency was frivolous and respondent’s agents conducted the
audit in a negligent manner. Petitioner’s motion to dismiss was
denied.
Petitioner subsequently filed a motion for reconsideration
alleging that the notice of deficiency was invalid on the ground
that Petito Corp. was a subchapter S corporation, and, therefore,
respondent was obliged under sections 6241-6245 of the unified
subchapter S corporation audit and litigation procedures to issue
a final notice of S corporation administrative adjustment (FSAA)
to Petito Corp. before issuing a notice of deficiency to
petitioner. Petitioner asserted that Petito Corp. made a valid
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