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Penalty
Year Deficiency I.R.C. Sec. 6663
2000 $106,074 $79,555.50
2001 74,841 56,130.75
2002 74,156 55,617.00
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure. After concessions, the issues for decision are:
(1) Whether petitioner’s solely owned S corporation received
and failed to report taxable income for taxable years 2000, 2001,
and 2002;
(2) whether petitioners are entitled to reductions in their
Federal taxable income for 2000 attributable to additional
Employee Embezzlement Account deductions that were not claimed on
their return;
(3) whether various deductions claimed as business expenses
of petitioner’s solely owned corporation should be disallowed as
personal expenses of petitioners or for failure to substantiate;
(4) whether petitioners are entitled to disallowed
deductions relating to their racing activities; and
(5) whether petitioners are liable for the fraud penalty
pursuant to section 6663 for the years in issue or, in the
alternative, whether petitioners are liable for the accuracy-
related penalty pursuant to section 6662.
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Last modified: November 10, 2007