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whether petitioners are liable for additions to tax and
penalties.3
FINDINGS OF FACT
The parties have stipulated some facts, which we incorporate
herein by this reference.4 When the petitions were filed,
Sparkman resided in Honolulu, Hawaii, and Mercury Solar PTO had a
mailing address in Honolulu, Hawaii.
Sparkman’s Sole Proprietorship
About 1983, Sparkman began selling solar water heating
systems to homeowners in Hawaii. For some 10 years, he operated
as a sole proprietor under the name “Mercury Solar”, which he had
registered with the State of Hawaii.
Hawaii Environmental Holdings
In 1993, Sparkman purported to transfer his Mercury Solar
business into a newly created entity, HEH. According to a
document entitled “Contract and Declaration of Creation of
Unincorporated Business Organization” (the HEH formation
document), HEH was created on June 1, 1993, as an “unincorporated
3 Respondent appears to concede that if Mercury Solar PTO is
disregarded for Federal tax purposes, it should not be subject to
deficiencies, additions to tax, or penalties.
4 The parties have stipulated the transcripts from trials in
the cases of Richter v. Commissioner, T.C. Memo. 2002-90, and
Hvidding v. Commissioner, T.C. Memo. 2003-151, each of which
dealt with the tax treatment of HEH customers. At the trial of
the instant cases, counsel for both parties agreed that the Court
may consider testimony given in Richter and Hvidding “as if that
testimony was presented to the Court in this case.”
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