Eric B. Benson, et al. - Page 29

                                       - 29 -                                         
          rental income recharacterized as constructive dividends counts as           
          omitted gross income of the Bensons only to the extent that this            
          income exceeds their pro rata share, which was disclosed on the             
          Bensons’ return.  We credit the Bensons with a “reverse” of                 
          $20,868 for the Lowell plant rent15 and $31,722 for the Stanford            
          plant rent16 that has been recharacterized as a constructive                
               In our prior opinion, we held that the Bensons had                     
          cancellation of indebtedness income of $88,291 in 1994.  Benson             
          v. Commissioner, T.C. Memo. 2004-272.  On brief, the Bensons make           
          no argument that this cancellation of indebtedness income was               
          disclosed on their 1994 return.  Furthermore, in our examination            
          of the Bensons’ 1994 return, we have not found any statement that           
          provides a clue to or discloses the cancellation of indebtedness.           
          For purposes of section 6501(e)(1)(A), we find that the                     
          cancellation of indebtedness income of $88,291 constitutes                  
          omitted gross income to the Bensons in 1994.                                
               Next, we find that the Bensons omitted from gross income               
          constructive dividends of $1,072 received from the Franklin                 
          account.  In our prior opinion, we stated that “on his 1994                 
          return [the Bensons’ son] Eric reported dividend income from                
          Franklin account #1 of $1,072.”  Benson v. Commissioner, supra.             

               15 $41,736 x 50% = $20,868                                             
               16 $63,444 x 50% = $31,722                                             

Page:  Previous  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  35  Next

Last modified: May 25, 2011