Olsen-Smith, LTD., Smith-Olsen, PLC, Tax Matters Partner - Page 4

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          Trust was Alfred J. Olsen (Olsen).  Smith/Associates was an APLLC           
          whose members were a complex trust named 1992 WLK Trust                     
          (1-percent owner) and a grantor trust named MBK-96 Trust                    
          (99-percent owner).  The grantor of MBK-96 Trust was Susan K.               
          Smith (Smith), Olsen’s wife.  Rossie/Associates was an APLLC with           
          a single member, a grantor trust named JJR-97 Trust.  The grantor           
          of JJR-97 Trust was James J. Rossie, Jr. (Rossie).  Olsen, Smith,           
          and Rossie (collectively, the three individuals) were all                   
          attorneys who during 1999 worked for and received salaries from             
          LTD.  During that year, the three individuals also received                 
          compensation from LTD in the form of fringe benefits.                       
               LTD filed a 1999 Form 1065, U.S. Partnership Return of                 
          Income (1999 return), that reported that LTD realized $627,736 of           
          ordinary income during that year and that all of this income was            
          NESE.  The 1999 return also reported that LTD’s partners were               
          Smith/Olsen, Smith/Associates, and Rossie/Associates, but did not           
          provide any details as to the members of the LLCs.  In relevant             
          part, the Commissioner determined in the FPAA that LTD’s NESE               
          totaled $696,807 on account of a $69,071 increase that respondent           
          made to LTD’s ordinary income.  The Commissioner has since                  
          conceded a portion of the $69,071 increase in ordinary income               
          (and NESE).                                                                 









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