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disclosure for purposes of section 6501(e). Therefore, we find
that the Hercules payment is omitted gross income for purposes of
section 6501(e).
The parties also dispute whether the Bensons omitted from
their 1989 income tax return $29,400 in constructive dividends
from the ERG payments related to the Lowell plant. As we found
supra, the 1989 return of NPI provided a misleading disclosure
because the return did not reveal that NPI paid rent for the
Lowell plant even though it did not have a contractual obligation
to make any rent payments. NPI’s return failed to adequately
apprise respondent of the nature of this income for purposes of
section 6501(e)(1)(A)(ii); therefore, the $29,400 of constructive
dividends is omitted gross income.12
Respondent’s calculation of the Bensons’ omitted gross
income included “Interest/Dividend (NPI)” income of $861. In his
brief, respondent failed to explain why this amount constituted
omitted gross income. We will not include the $861 of
“interest/dividend (NPI)” income in our calculation of the
Bensons’ omitted gross income.
For purposes of applying section 6501(e), we hold that the
Bensons omitted gross income of $444,086, itemized as follows:
12 In the “reverse rental income recharacterized as
constructive dividends”, it appears that respondent reduced the
omitted gross income in an amount equal to the Bensons’ pro rata
share of the Lowell plant rent.
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