Charles A. and Marian L. Derby, et al. - Page 3

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          deficiencies pursuant to section 6662(a)2 and (h).                          
          Alternatively, respondent alleges that those petitioners are                
          liable for penalties for substantial valuation misstatements                
          equal to 20 percent of the deficiencies pursuant to section                 
          6662(a), (b)(3), and (e)(1)(A).                                             
               The issues common to all petitioners are whether:  (1)                 
          Petitioners are entitled to the charitable contribution                     
          deductions claimed under section 170(a)(1) for the transfer to a            
          tax-exempt medical foundation of intangible assets associated               
          with each petitioner physician's medical practice, and (2) the              
          individual petitioners are liable for the 40-percent accuracy-              
          related penalty for gross valuation misstatements pursuant to               
          section 6662(a) and (h) or, alternatively, for the 20-percent               
          penalty for substantial valuation misstatements pursuant to                 
          section 6662(a), (b)(3), and (e)(1)(A).3  In addition, the                  
          following issues involve certain of petitioners as indicated,               
          whether:  (1) Petitioners Daniel J. and Jean C. Kennedy (the                
          Kennedys) underreported Dr. Kennedy's 1994 gross receipts by                
          $3,760 on Schedule C, Profit or Loss From Business, and (2)                 

               2 Unless otherwise noted, all section references are to the            
          Internal Revenue Code of 1986 as in effect for the year in issue,           
          and all Rule references are to the Tax Court Rules of Practice              
          and Procedure.                                                              
               3 The deficiencies also reflect adjustments that are                   
          derivative of the principal adjustments, are not directly                   
          disputed by petitioners, and will be resolved by our resolution             
          of the principal adjustments.  We do not further discuss those              
          derivative adjustments.                                                     

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