Eric B. Benson, et al. - Page 11

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          from ERG that we found to be constructive dividends to the                  
          Bensons.  The Bensons also assert that ERG’s Forms 1120 disclosed           
          deductions for payments, which were found to be constructive                
          dividends to the Bensons.                                                   
               Respondent argues that the returns of NPI did not adequately           
          disclose the nature and amount of the Bensons’ constructive                 
          dividend income.  Respondent also argues that disclosures on                
          amended returns are not relevant to the question of adequate                
          disclosure.  Respondent also argues that the corporate returns of           
          ERG are not relevant to whether the Bensons made adequate                   
          disclosures on their individual tax returns because ERG was a               
          taxable entity.                                                             
               A.   Disclosures on Amended Returns and ERG Corporate                  
                    Tax Returns Are Not Relevant to the Application of                
                    Section 6501(e)(1)(A)(ii)                                         
               The Bensons argue that the amended returns of NPI disclose             
          items of gross income for purposes of section 6501(e)(1)(A)(ii).            
          Amended returns do not correct the omission of income from an               
          original return.  Houston v. Commissioner, supra; Goldring v.               
          Commissioner, supra.  Section 6501(e)(1)(A)(ii) requires                    
          respondent to examine only the Bensons’ original returns and the            
          original returns of the passthrough entities listed on their                
          returns.  Any “clues” to omitted gross income on the amended                

          $31,020 in 1993, and $41,736 in 1994 from ERG’s so-called rent              
          payments for the Lowell plant.  Id.                                         

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