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John R. Menard, docket No. 674-02
Accuracy-related penalty
Year Deficiency sec. 6662(a)
1998 $4,909,407 $981,882
At the close of trial, pursuant to Rule 41(b)(1), respondent
moved to amend the pleadings to conform to the evidence in light
of testimony revealing that petitioner Menard, Inc., paid, and
claimed as a deduction, Team Menard, Inc., salaries. We granted
respondent’s motion. On the basis of the Rule 41(b)(1) motion
and concessions of the parties,2 respondent determined
petitioners’ deficiencies and section 6662(a) accuracy-related
penalties as follows:
Accuracy-related penalty
Docket No. Deficiency sec. 6662(a)
673-02 $9,069,126 $460,031
674-02 2,587,000 517,400
2In the stipulation of facts, the parties agreed that for
petitioner Menard, Inc.’s (Menards), taxable years ending Jan.
31, 1998 (TYE 1998), and Jan. 31, 1999 (TYE 1999), and for
petitioner John R. Menard’s (Mr. Menard) taxable year ending Dec.
31, 1998, Menards paid $4,731,881, $3,791,202, and $3,853,251,
respectively, of Team Menard, Inc.’s (TMI), expenses.
Additionally, in the stipulation of facts, respondent conceded
that to the extent Menards claimed deductions for TMI expenses
that Menards paid during the period from Feb. 1 to Dec. 31, 1997,
those amounts are not constructive dividends to Mr. Menard for
his taxable year ending Dec. 31, 1998.
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