- 31 -
provided a summary of petitioners’ positions with respect to the
issues of the latest settlement proposal. With respect to the
deferred income issue, Ms. Stephenson stated that this amount was
“the accumulation of royalties owed to inventors” and that ISOA,
Inc., was “merely a conduit for distributing these royalty
payments to the inventors.” Ms. Stephenson for the first time
also claimed that ISOA, Inc.’s 1995 return erroneously indicated
that the corporation was on the cash basis method of accounting.
In addition, Ms. Stephenson stated that ISOA, Inc., was an
accrual basis taxpayer and that the proper accounting treatment
of the “deferred income” would have been “to recognize the
royalty income when received and set up a corresponding payable
to the inventors for the same amount.”
By letter to Ms. Stephenson dated August 11, 2000, Appeals
Officer Medina rejected petitioners’ June 2000 settlement
proposal.
III. The Notice of Deficiency
On October 19, 2000, respondent issued to petitioners a
notice of deficiency for their 1993 through 1996 individual
taxable years. The notice of deficiency also included
adjustments with respect to Beacon for the taxable years 1993
through 1996 and ISOA, Inc., for the taxable years 1995 and
Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Next
Last modified: November 10, 2007