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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
dividend.
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
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