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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
7(...continued)
$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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