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1995 1996 1997
Gross income $102,251 $138,137 $161,651
Total expenses 82,533 114,258 120,196
Net profit 19,718 23,879 41,455
G. Notices of Deficiency
On January 8, 2001, respondent timely mailed to the
Weeldreyers a statutory notice of deficiency for 1995, 1996, and
1997 (the Weeldreyer notice of deficiency). Also on January 8,
2001, respondent timely mailed to Dreyer Farms a statutory notice
of deficiency for its fiscal years ended November 30, 1995, 1996,
and 1997 (the Dreyer Farms notice of deficiency).
In the Dreyer Farms notice of deficiency, respondent
disallowed the food, lodging, and medical expenses deducted by
Dreyer Farms, totaling $15,781 for 1995, $21,418 for 1996, and
$21,757 for 1997. Respondent determined that (1) Dreyer Farms
failed to establish that the food and lodging expenses were
ordinary and necessary business expenses under section 162 and
(2) those items are the Weeldreyers’ personal expenses.
Respondent further determined that Dreyer Farms was liable for
the accuracy-related penalty under section 6662(a).
In the Weeldreyer notice of deficiency, respondent
determined that payments by Dreyer Farms of the Weeldreyers’
food, lodging, and medical expenses resulted in constructive
dividends as follows:
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Last modified: May 25, 2011