PK Ventures, Inc. and Subsidiaries, et al. - Page 5

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                                                Penalty                               
                          Year Deficiency     Sec. 6662(a)                            
                          1990    $211,278       $2,269                               
                          1991     791,480        9,517                               
                          1992     649,700        1,316                               
                          1993     750,743          –-                                
               By Notice of Final Partnership Administrative Adjustment               
          (FPAA) dated January 11, 1999, respondent determined an upward              
          adjustment of $100,661 with respect to the ordinary income of               
          P.K. Ventures I Limited Partnership (PKVI LP) for 1991.                     
          Robert L. Rose (Rose), the designated tax matters partner for               
          PKVI LP, filed a Petition for Readjustment of Partnership Items             
          Under Code Section 6226.                                                    
               Respondent determined deficiencies, an addition to tax, and            
          penalties with respect to the Federal income taxes for                      
          petitioners Robert L. and Alice N. Rose (the Roses) for 1990,               
          1991, 1992, 1993, 1994, and 1995 as follows:                                
                                     Addition to Tax      Penalty                     
                Year    Deficiency   Sec. 6651(a)(1)    Sec. 6662(a)                  
                1990     $11,729            –-             $2,346                     
                1991      90,133            --             18,027                     
                1992     503,928            --            100,786                     
                1993     177,286            --             35,457                     
                1994     248,981            --               –-                       
                1995     397,096          $8,446             --                       
               The principal issues tried and briefed in these consolidated           
          cases were:                                                                 
               (1) Whether a transfer of $1 million from PK Ventures, Inc.            
          (PK Ventures), to 10 individuals, 9 of whom were shareholders of            






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