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1996.11 In the notice, respondent asserted, in part, that
numerous business expenditures claimed by petitioners, Beacon,
and ISOA, Inc., had not been adequately substantiated and did not
have a business purpose. Respondent also determined that Beacon
and ISOA, Inc., had failed to properly include certain amounts in
income. Specifically, respondent determined that ISOA, Inc.,
failed to properly include the $195,000 of “deferred income” in
the corporation’s 1995 taxable income. The notice of deficiency
determined deficiencies, additions to tax, and accuracy-related
penalties, as follows:12
Additions to tax Penalty
Year Deficiency sec. 6651(a)(1) sec. 6662
1993 $23,733 $2,538 $4,747
1994 28,514 7,209 5,703
1995 75,089 11,306 15,018
1996 28,307 --- 5,661
IV. The Petition and Proceedings to Date
On January 17, 2001, petitioners timely filed a petition
with the Court. Petitioners placed all of the amounts in the
notice of deficiency in dispute. Petitioners alleged, among
other things, that the claimed business expense deductions with
respect to petitioners’ business activities had been adequately
11 The adjustments with respect to ISOA, Inc., for the
taxable year 1996 were for the corporation’s taxable year ending
Aug. 15, 1996.
12 The sec. 6663 fraud penalty was conceded as a result of
Appeals Office consideration.
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Last modified: November 10, 2007