Eric B. Benson, et al. - Page 22

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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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