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paid by PK Ventures. The Roses reported the $1,646,948 of
officer compensation on their joint income tax return for 1992.
On its consolidated income tax return for 1993, PKV&S
claimed a $2,031,993 deduction for officer compensation paid to
Rose. PKV&S reported that $32,500 of this amount was paid by
TBPC, that $32,500 was paid by TPTC, and that the balance was
paid by PK Ventures. The Roses reported the $2,031,993 of
officer compensation on their joint income tax return for 1993.
In addition to this amount, the Roses reported interest from
PK Ventures of $292,350.
Rose received the amounts of wages and salaries that he
reported on the Roses’ joint income tax returns for 1994 and 1995
from TPC. TPC issued Forms W-2, Wage and Tax Statement, to Rose
with respect to these amounts.
D. IRS Determinations
With respect to 1990, the IRS determined that Rose should
have reported a total of $350,000 of compensation from
PK Ventures and its subsidiaries. The IRS determined that this
amount included $285,000 of compensation that had been accrued by
SLPC, TBPC, and TPTC during 1987, 1988, 1989, and 1990 and paid
to Rose in 1990 and included $65,000 of compensation that had
been accrued by PK Ventures prior to 1990 and paid to Rose in
1990. After taking into account the $17,000 of gross income that
Rose had reported on a Schedule C that was attached to the Roses’
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