- 50 -
On its return for the tax year ended November 30, 1997,
petitioner reported only $500,000 of the $2.5 million NSI fee
received on January 30, 1997. Petitioner did not report the $2
million portion of the NSI fee as income.
On the CKH and CKH’s affiliates consolidated income tax
return filed for the short tax year October 22, 1996, through
March 31, 1997, CKH reported the $2 million portion of the NSI
fee transferred by petitioner. The $2 million of income was
offset by CKS’s $2,079,706 reported loss for that year and a
$1,739,488 NOL carryover from prior years.
In the notice of deficiency for the taxable year ended
November 30, 1997, respondent determined that the $2 million
portion of the NSI consulting fee was includable in petitioner’s
income. Petitioner alternatively alleged in the petition that,
in the event this $2 million portion of the NSI fee was held to
be taxable to petitioner, petitioner should be entitled to deduct
the $2 million payment to CKH as a business expense.
2. Petitioner’s Advances to Koehler
On August 31, 1994, Koehler executed a demand promissory
note to petitioner for $31,705 for advances that petitioner had
made to Koehler over a period extending back to the 1980s.
16(...continued)
to be retained by CKS. The parties, however, stipulated that
$134,000 was the amount that CKS actually retained. The record
does not disclose the reason for this $2,000 discrepancy.
Page: Previous 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 NextLast modified: May 25, 2011