- 3 - (5) whether petitioners failed to report a $15,000 capital gain on their 1999 Federal income tax return. We hold that they did not, because we find that respondent’s determination as to this item was arbitrary; and (6) whether petitioners are liable for additions to tax under section 6651(a)(1) for 1997 and 1999. We hold that they are. FINDINGS OF FACT Some of the facts have been stipulated and are so found. The stipulated facts and the accompanying exhibits are incorporated herein by this reference. Petitioners resided in Sanford, North Carolina, at the time they filed their petition. FRC International, Inc. Mr. Dunne incorporated FRC in Delaware in 1982. FRC’s principal place of business was Holland, Ohio. FRC was in the business of selling fire protection material, particularly a chemical called halon, through contracts with the Federal Government. FRC was an S corporation for all relevant periods. Mr. Dunne was FRC’s sole shareholder from the time of its incorporation until 1993. Mr. Dunne was also a director and an employee of FRC. In 1993, Richard Marcus became a 50-percent shareholder of FRC while Mr. Dunne continued to own the remaining 50 percent. Mr. Marcus also became the president of FRC andPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: March 27, 2008