- 18 -
expect that these payments reflected the monthly payments agreed
to during the arm’s-length negotiation. Nothing in the returns
of NPI informed respondent that NPI received rent payments from
ERG that exceeded the amounts that the parties agreed upon in the
unbundling agreement. We hold that the Bensons did not
adequately apprise respondent of the nature of these transactions
for purposes of section 6501(e)(1)(A)(ii).
We hold that the amended returns of NPI and the corporate
returns of ERG are not adjunct returns for purposes of section
6501(e)(1)(A)(ii). We also hold that the Bensons did not
adequately apprise respondent of the nature and amount of the
transfers from ERG to NPI.10
II. Section 6501(e)--Substantial Omissions
In light of our holding on petitioners’ first argument, the
Bensons concede that the 6-year period of limitations applies to
the 1990 and 1993 tax years. The Bensons argue that they did not
omit in excess of 25 percent of reported income in the 1989 and
1994 taxable years. The Bensons and respondent each offered
calculations for the amounts of gross income omitted and reported
on the Bensons’ returns.
10 Even if we considered the amended returns of NPI and the
ERG returns we would draw the same conclusion since the
characterizations of the payments from ERG to NPI were misleading
for the same reasons.
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011