Michael J. Sullivan and Maureen Sullivan - Page 3

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               Prior to trial, petitioners filed an amended return and                
          conceded the deficiency and paid it in full.  The remaining issue           
          for decision is whether petitioners are liable for the accuracy-            
          related penalty under section 6662(a) due to a substantial                  
          understatement of the amount of their income tax, as defined in             
          section 6662(d).                                                            
                                     Background                                       
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and exhibits received into evidence are            
          incorporated herein by reference.  At the time the petition in              
          this case was filed, petitioners resided in Los Altos,                      
          California.                                                                 
               During taxable year 2000, petitioner Michael J. Sullivan               
          (Mr. Sullivan) was employed as a Program Manager with CEMAX-ICON,           
          Inc. (CEMAX), and earned approximately $105,000.  Mr. Sullivan              
          received biweekly pay statements from CEMAX, and CEMAX reported             
          this income to the Internal Revenue Service on Form W-2, Wage and           
          Tax Statement.  Mr. Sullivan also received approximately $182,000           
          in salary and severance payments from another position he had               
          held with Phillips Silicon Valley Center (Phillips).                        
               For tax year 2000, petitioners timely filed a Form 1040, U.S           
          Individual Income Tax Return, which had been prepared by a                  
          Certified Public Accountant.  There were several Forms W-2 and              
          Forms 1099-R, Distributions From Pensions, Annuities, Retirement            






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