Shannon D. Mullins - Page 3

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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.                                                               
               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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