Eric B. Benson, et al. - Page 19

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               A.   1989                                                              
               The parties calculated the Bensons’ 1989 omitted gross                 
          income as follows:                                                          
          Items of omitted              Amounts asserted   Amounts asserted           
          gross income                  by the Bensons     by respondent              
          Payments from ERG to NPI           --             $483,098                  
          Check ref: Carroll            $96,749             96,749                    
          Automobile expenses      10,624                   10,624                    
          Life insurance                2,404               2,404                     
          ERG payment related to             --             29,400                    
          Lowell plant                                                                
          Director’s fees               6,000                    6,000                
          Franklin dividends            193                      193                  
          Interest/dividend (NPI)            --             861                       
          Royalty income (1099)              709                 709                  
          Reverse royalty income             --               1(165,481)              
          recharacterized as                                                          
          constructive dividends                                                      
          Reverse NPI rental income          --                2(19,610)              
          recharacterized as                                                          
          constructive dividends                                                      
               Total                    116,679             444,947                   
               1 This amount represents a negative number.  Respondent                
          appears to have reduced the $483,098 payment from ERG to NPI by             
          the amount of NPI’s royalty income reported by the Bensons on               
          their 1989 return.                                                          
               2 This amount represents a negative number.  NPI’s 1989 Form           
          1120S reported its income from gross rental real estate                     
          activities and listed Burton O. Benson as a 66.7-percent                    
          shareholder.  Respondent appears to have reduced the $29,400 of             
          omitted gross income from the Lowell plant rent by the Bensons’             
          pro rata share of the Lowell plant rent ($29,400 x 66.7% =                  
          19,609.8).                                                                  
          The parties assert that the Bensons reported gross income in 1989           
          as follows:                                                                 
          Items of gross           Amounts asserted    Amounts asserted               
          income                    by the Bensons          by respondent             
          Wages                    $103,372                 $103,372                  
          Interest                 2,505                    2,505                     





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