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Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
1996 $146,847 $33,041 $7,816
1997 272,771 61,373 14,593
In a statement attached to the notice of deficiency, respondent
explained that business income purportedly earned by petitioner
Life Center Houston Business Trust (Life Center) in 1996 and 1997
and by petitioner Life Choices Business Trust (Life Choices) in
1997 is taxable to Dr. Trowbridge on the alternative grounds that
(1) Life Center and Life Choices were shams, (2) Life Center and
Life Choices were grantor trusts of which Dr. Trowbridge was the
owner, or (3) Dr. Trowbridge in fact earned such income and,
under the assignment of income doctrine, could not shift the
incidence of taxation with respect to such amounts. Solely as a
protective measure (i.e., as an alternative position in the event
the foregoing arguments proved to be unsuccessful), respondent
also determined deficiencies in, and additions to, tax with
respect to Life Center for 1996 and 1997 and Life Choices for
1997 and issued notices of deficiency (also dated October 20,
2000) to that effect.2 Petitioners timely filed a petition for
redetermination.
1(...continued)
by respondent from Dr. Trowbridge in October 1997 and October
1998, respectively, are not valid income tax returns (which we so
find).
2 Because we do not reach respondent’s alternative
position, we do not set forth the deficiencies and additions to
tax determined against Life Center and Life Choices.
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