Frederick Smith, Jr. and Vanessa Smith - Page 6




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          section 6662(a) because of negligence or disregard of the rules             
          or regulations.                                                             
               As a defense to respondent’s determination of omitted                  
          income, petitioners seek to characterize the $32,500 check issued           
          to OTFP by Ms. Johnson as a loan.  Petitioner and Ms. Johnson did           
          not execute a loan agreement with respect to the $32,500 payment.           
          Petitioner testified about the payment from Ms. Johnson.  He                
          indicated that it “was a personal loan made from Ms. Jill Johnson           
          to myself” and because it “was sealed with a hug and a handshake            
          outside of her –- outside of our Summer League offices in West              
          L.A., and if that was good enough for her, that was good enough             
          for me.”  According to petitioner, Ms. Johnson, a personal                  
          friend, lent petitioner the money because he agreed to produce              
          the FSZ show.  OTFP used the $32,500 payment to: (1) Produce the            
          FSZ show; (2) to pay expenses on other projects; and (3) for                
          general office expenses.  Petitioner deposited the check into the           
          business bank account of OTFP.                                              
               Petitioner testified that he did not have the funds                    
          available to produce the FSZ show and required funds from Ms.               
          Johnson because he was in bankruptcy at the time.  Petitioner               
          produced a letter dated December 21, 1999, from Ms. Johnson which           
          indicated that she lent petitioner funds to assist in the                   
          operations of OTFP.                                                         








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