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petitioners are liable for section 6651(a)(1)1 additions to tax
for failing to timely file their 2000 and 2001 joint tax returns.
FINDINGS OF FACT
In 1976, petitioner Douglas Bynum started, as a sole
proprietorship, an engineering consulting business. In 1977, he
incorporated the business as Starfire Engineering, Inc. (SEI).
SEI issued both Mr. Bynum and Shirley Bynum 500 shares at $1 per
share.
Mr. Bynum routinely paid cash for various SEI business
expenses. When SEI’s business revenues increased, Mr. Bynum used
these funds to pay startup costs for seven other businesses
operated under SEI (i.e., two secretarial services businesses,
created in 1978 and 1980; two tax preparation services
businesses, created in 1979 and 1980; two beauty shops, created
in 1979 and 1983; and a steel fabrication business, created in
1982). Between 1982 and 1986, Mr. Bynum either ceased operation
of or sold the seven businesses. Mr. Bynum did not demand or
receive repayment for any of the expenses he paid on behalf of
SEI. In 1995, Mr. Bynum dissolved SEI. Petitioners deducted as
business bad debts on their 2000 and 2001 joint tax returns the
expenses Mr. Bynum had paid on behalf of SEI.
1 Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
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Last modified: March 27, 2008