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John M. and Carolyn Merritt1
Accuracy-
Addition to Tax Related Penalty
Year Deficiency Sec. 6651(a)(1) Sec. 6662(a)
1994 $ 83,920 $20,980 $16,784
1995 108,096 5,405 21,619
J.M.A. & Associates, P.C.
1994 $264,558 $13,228 $52,912
1995 220,564 22,056 44,113
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
After settlement of some issues, the primary issues for
decision are as follows:
(1) Whether petitioner should include in his 1994 income
$129,000 in compensation that he received from his law firm,
petitioner J.M.A. & Associates, P.C. (the law firm or the firm),
but which $129,000 petitioner returned to the firm later in 1994;
and
(2) Whether, for its taxable years ending November 30, 1994,
and November 30, 1995, the law firm is entitled to ordinary and
necessary business expense deductions for litigation costs it
advanced on behalf of its contingent fee clients.
1 Hereinafter references to petitioner in the singular are to
petitioner John M. Merritt.
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