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stipulated dismissal with prejudice. On February 3, 1999, the
U.S. District Court for the District of Colorado dimissed William
Houchin from the lawsuit with prejudice.
The parties stipulated that the correct amount of income
received by W.C. Houchin Corp. from the settlement agreement with
Exxon and ARCO for the purpose of calculating any income
adjustment is $6,145,315.5
Petitioner W.C. Houchin Corp. did not report the royalty
income received from the settlement on its 1998 corporate income
tax return. Petitioner W.C. Houchin Corp. reported the royalty
income and related settlement expenses on its corporate return
for 1999, the first year for which the corporation elected S
corporation status. Petitioners William and Josephine Houchin
reported the royalty income received from the settlement, among
other settlement-related items, as flowthrough items on their
1999 individual Federal income tax return.
OPINION
I. Settlement-Related Deficiency
A. Burden of Proof
Section 7491(a) places the burden of proof on the
Commissioner with regard to certain factual issues relevant to
ascertaining liability for tax in the case of Court proceedings
arising from examinations commenced after July 22, 1998.
5 See supra note 4.
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