William C. and Josephine Houchin - Page 2

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          of $53,532 with regard to petitioners William and Josephine                 
          Houchin’s 1999 Federal income tax.  Respondent determined the               
          following deficiencies in and accuracy-related penalties on                 
          petitioner W.C. Houchin Corp.’s Federal income taxes:                       
          Penalty                                                                     
          Year        Deficiency         Sec. 6662(a)                                 
          1998        $1,211,643           $242,329                                   
          1999         1,276,748            255,350                                   
          After concessions,3 we must decide (1) whether petitioner W.C.              
          Houchin Corp. should recognize $6,145,315 of lawsuit settlement             
          proceeds in income in 1998, (2) whether petitioners William and             
          Josephine Houchin are liable for the accuracy-related penalty               
          pursuant to section 6662(a) for 1999, and (3) whether W.C.                  
          Houchin Corp. is liable for the accuracy-related penalty pursuant           
          to section 6662(a) for 1998.                                                
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and the attached exhibits are                      
          incorporated herein by this reference.  Petitioners William and             

               2(...continued)                                                        
          the Internal Revenue Code, and all Rule references are to the Tax           
          Court Rules of Practice and Procedure.                                      
               3  On brief, respondent conceded the 1999 deficiency and               
          penalty related to W.C. Houchin Corp.  Petitioners and respondent           
          stipulated the treatment of several adjustments in the notices of           
          deficiency issued to W.C. Houchin Corp. for the year 1998 and to            
          William and Josephine Houchin for the year 1999 if the Court                
          finds for respondent with regard to the recognition of income by            
          W.C. Houchin Corp. in 1998.                                                 





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