Everett J. Diers - Page 2

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          claim Schedule C office expenses of $3,600; (4) whether he is               
          subject to self-employment tax of $6,365; and (5) whether he is             
          liable for an accuracy-related penalty under section 66621 of               
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and the attached exhibits are                      
          incorporated herein by this reference.  At the time he filed the            
          petition, petitioner resided in El Paso, Texas.                             
          A.   Insurance Business                                                     
               From approximately 1988 through 1994, petitioner worked as             
          an insurance agent for American Income Life Insurance Co.                   
          (American).  As part of its business practice, American would pay           
          petitioner the year’s commissions in advance for each insurance             
          policy petitioner sold during the year.  Petitioner also would              
          receive a renewal commission provided that the insured renewed              
          the policy.  American would also lend petitioner funds to cover             
          expenses related to his business for American.                              

               1 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, unless otherwise                 
               2 Respondent issued a notice of deficiency claiming, inter             
          alia, a negligence penalty of $2,627.20.  However, because of               
          petitioner’s reliance on a letter from the attorney who                     
          represented him during the insurance company settlement,                    
          respondent concedes the penalty on the portion of the                       
          underpayment related to this settlement.                                    

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Last modified: May 25, 2011