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Respondent determined a deficiency of $6,532 in petitioner’s
Federal income tax for 2001, a section 6651(a)(1) addition to tax
of $1,568, and a section 6662(a) accuracy-related penalty of
$1,306. Following concessions, the issues for decision are: (1)
Whether petitioner received unreported income as a shareholder in
an S corporation, as reported on Schedule K-1; (2) whether
petitioner received capital gain income from the sale of his
shares in an S corporation; (3) whether petitioner is liable for
an addition to tax under section 6651(a)(1); and (4) whether
petitioner is liable for an accuracy-related penalty under
section 6662.
Background
Some of the facts have been stipulated, and they are so
found. The stipulation of facts and the attached exhibits are
incorporated by this reference. At the time of filing the
petition, petitioner resided in Cape Coral, Florida.
Petitioner and Rolan Taylor (Mr. Taylor) were each 50-
percent shareholders in Edgington, Mullins, & Taylor Funeral
Home, Inc. (Edgington Mullins), an S corporation doing business
in Winchester, Kentucky. Petitioner was also employed by
Edgington Mullins as an embalmer.
Petitioner purchased his one-half interest in Edgington
Mullins from Betty Edgington for approximately $35,000 in 1998.
Petitioner’s business relationship with Mr. Taylor deteriorated,
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