Normandie Metal Fabricators, Inc., (2000)
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Normandie Metal Fabricators, Inc., (2000)
T.C. Memo. 2000-102
UNITED STATES TAX COURT NORMANDIE METAL FABRICATORS, INC., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 2526-98. Filed March 27, 2000.Louis F. Brush, for petitioner. Halvor N. Adams III, for respondent.MEMORANDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined deficiencies in petitioner's Federal income tax and a penalty under section 6662 as follows:Penalty Year Deficiency Sec. 6662 1993 $130,822 $26,164 1994 135,336 27,067 1995 120,550 24,110 In an amendment to answer filed January 7, 1999, respondent contends that petitioner's deficiencies are $163,173 for 1993, $155,139 for 1994, and $141,328 for 1995, and that petitioner is liable for penalties of $32,635 for 1993, $31,028 for 1994, and $28,266 for 1995.1 After concessions, the issues for decision are: 1. Whether petitioner may deduct as compensation for Isidore Klein and Steven Klein for 1993, 1994, and 1995, the amounts shown below as the parties contend, or some other amount: Year Isidore Klein Steven Klein Total Petitioner 1993 $352,000 $500,400 $852,400 1994 368,000 450,400 818,400 1995 15,000 820,400 825,400Respondent 1993 $405,250 1994 392,157 1995 444,2841994, and $445,000 in 1995, based on the following amounts of reasonable compensation: Year Isidore Klein Steven Klein Total 1993 $200,000 $300,000 $500,000 1994 200,000 300,000 500,000 1995 5,000 440,000 445,000 2. Whether petitioner is liable for the accuracy-related penalty under section 6662 for substantial understatement of tax for 1993, 1994, and 1995. We hold that it is for 1993 and 1994, but not for 1995.Section references are to the Internal Revenue Code in effect during the years in issue. Rule references are to the Tax Court Rules of Practice and Procedure. I. FINDINGS OF FACT Some of the facts have been stipulated and are so found. Petitioner is a corporation the principal office of which was in Port Washington, New York, when it filed the petition. A. The Kleins Isidore Klein was born in 1913. He is married to Gertrude Klein. He was a baker and taught baking at a vocational high school in New York. He also manufactured small metal products that he used in his baking business.Steven Klein was born in 1942. He is the son of Isidore and Gertrude Klein. B. Formation of Petitioner Petitioner manufactures and sells small implements and metal food handling equipment primarily for the bakery industry. Isidore Klein and Victor Lampeh (Lampeh) incorporated petitioner in 1949 in New York, after...See the full content of this document
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