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authorizations for H to “tip” dancers in the amounts
authorized, and (2) the 1990 transfer of the club’s
operation from X, Inc. to Y, Inc., gave rise to a
taxable liquidating dividend from X, Inc., to P. R
also disallowed 1989 and 1990 Schedule C deductions
claimed by P for parking fees and for bad debt
deductions as guarantor of construction loans defaulted
upon by P&P, Inc. R also determined that P was subject
to the sec. 6662, I.R.C., accuracy-related penalty.
1. Held: The amounts listed on the “withdrawal
authorizations” constituted valid promotional expenses
of X, Inc., in part, and disguised dividends taxable to
P, in part.
2. Held, further, the transfer of the club’s
operation from X, Inc., to Y, Inc., constituted a tax-
free reorganization under sec. 368(a)(1)(D), I.R.C.,
that did not involve a distribution of “boot” taxable
to P under sec. 356(a)(1)(B) and (2), I.R.C.
3. Held, further, R’s disallowance of P’s
Schedule C deductions for parking fees and for bad
debts is sustained.
4. Held, further, R’s penalty against P is
sustained with respect to the deficiencies arising out
of the disallowances of P’s Schedule C deductions.
Jerry S. Payne, pro se.
Kathryn Bellis, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
HALPERN, Judge: By notice of deficiency dated April 15,
1999 (the notice), respondent determined deficiencies in and
additions to petitioner’s Federal income tax liabilities as
follows:
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