Alpha Medical, Inc., f.k.a. Alpha Medical Management, Inc., (1997)
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Alpha Medical, Inc., f.k.a. Alpha Medical Management, Inc., (1997)
T.C. Memo. 1997-464
UNITED STATES TAX COURT ALPHA MEDICAL, INC., f.k.a. ALPHA MEDICAL MANAGEMENT, INC., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 22802-94. Filed October 14, 1997.John P. Konvalinka and Thomas E. Smith, for petitioner. Bonnie L. Cameron, for respondent.MEMORANDUM FINDINGS OF FACT AND OPINION PARR, Judge: Respondent determined a deficiency in petitioner's 1990 Federal income tax of $1,376,520, and a penalty under section 66621 of $275,304.The issues for decision are: (1) Whether an amount paid by petitioner to William T. Rogers (Rogers) as compensation during taxable year 1990 is reasonable within the meaning of section 162(a)(1). We find the amount paid was not reasonable to the extent set out below. (2) Whether petitioner is liable for the accuracy-related penalty under section 6662(d) for substantially understating its income for the year in issue.2 We find it is.FINDINGS OF FACT Some of the facts have been stipulated. The stipulated facts and attached exhibits are incorporated herein by this reference. A. Petitioner's Background Alpha Medical Management, Inc., also known as Alpha Medical,Inc. (hereinafter petitioner), is a medical management corporation duly formed and organized under the laws of Tennessee. At the time the petition was filed, its principal place of business was in Chattanooga, Tennessee. Rogers incorporated petitioner in 1982, with an initial capital contribution of $1,000. He has not made any additional capital contributions to petitioner. Petitioner began operations on January 1, 1986. By 1990, petitioner had 60 employees.Petitioner provides medical management services to home health care agencies and hospitals with home health care departments. Home health care agencies are subject to State licensing requirements and requirements known as Certificate of Need. The services petitioner provides to its clients are tailored to meet each client's individual needs and to assist each client in complying with the various licensing requirements, Certificate of Need requirements, and the various Medicare and Medicaid regulations. In most instances, petitioner's services include the management of four categories of operations: (i) Reimbursement, (ii) accounting, (iii) accounts receivable, billing, and computer operation, and (iv) clinical/ operational/consulting.Petitioner's entire operation is located in one office in Chattanooga, Tennessee. Petitioner's clients' locations grew from 1 in 1986 to 60 in 1992 in Tennessee, Kentucky, Arkansas, and Florida. In 1990, petitioner managed 43 locations. B. William T. Rogers' Background and Duties Since petitioner began operations in 1986, Rogers has been its president, sole director, and sole shareholder. Rogers worked 12 hours a day and was available at all times of t...See the full content of this document
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