Conrad Janis and Maria G. Janis - Page 2

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          Federal income taxes for 1995, 1996, and 1997 and penalties under           
          section 6662(a) for those years, respectively, as follows:                  
                     Year    Deficiency    Sec. 6662(a) Penalty                       
                     1995     $334,589          $66,918                               
                     1996       24,739            4,948                               
                     1997      158,356           31,671                               
          Respondent determined deficiencies in petitioners Carroll Janis             
          and Donna L. Seldin Janis’s (Carroll and Donna) Federal income              
          taxes for 1995, 1996, and 1997 and penalties under section                  
          6662(a) for those years, respectively, as follows:                          
                     Year    Deficiency    Sec. 6662(a) Penalty                       
                     1995     $532,930         $106,586                               
                     1996       58,635           11,727                               
                     1997      169,248           33,849                               
          The issues for decision in these consolidated cases are:                    
          (1) Whether petitioners, who inherited an art gallery, can                  
          calculate the gallery’s cost of goods sold using the undiscounted           
          value of the gallery’s collection of artwork rather than the                
          discounted value as determined for estate tax purposes and                  
          (2) whether petitioners are liable for accuracy-related penalties           
          under section 6662(a) for 1995, 1996, and 1997.                             
               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.                                                                  








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