Eric B. Benson, et al. - Page 28

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                    1.   Omitted Gross Income                                         
               We disagree with the Bensons’ calculation of 1994 omitted              
          gross income.  The Bensons concede that they omitted gross income           
          of $119,026 from their 1994 return.  For the reasons discussed              
          supra, we also find that the Bensons’ omitted gross income                  
          includes the $160,063 transferred from ERG to NPI, the excess               
          rent of $63,444 received for the Stanford plant, and the rent of            
          $41,736 received for the Lowell plant.                                      
               Respondent provided only the total figure for the Bensons’             
          omitted gross income in 1994.  In his calculations of omitted               
          gross income in 1989, 1990, and 1993, respondent reduced the                
          total omitted gross income by amounts described as “Reverse * * *           
          income recharacterized as constructive dividends”.  In our                  
          calculation, we credit the Bensons with a “reverse” of the                  
          payment from ERG to NPI that is recharacterized as constructive             
          dividends of $80,032 because the Bensons reported this amount on            
          their 1994 return.                                                          
               The 1994 return of NPI included gross rents of $200,605.               
          Because the return does not itemize the properties that generated           
          this income, we assume that the rents received from the Lowell              
          and Stanford plants are included in NPI’s total gross rents.  In            
          calculating omitted gross income, we will credit, or “reverse”,             
          the Bensons’ pro rata shares of rental income from the Lowell and           
          Stanford plants.  In other words, the “reverse” ensures that the            

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