Robert T. and Mary F. Gow, (2000)
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Robert T. and Mary F. Gow, (2000)
T.C. Memo. 2000-93
UNITED STATES TAX COURT ROBERT T. AND KAY F. GOW, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 25651-96. Filed March 20, 2000.Craig D. Bell and James C. Roberts, for petitioners. William Henck and Timothy B. Heavner, for respondent.MEMORANDUM FINDINGS OF FACT AND OPINION JACOBS, Judge: In a notice of deficiency dated August 29, 1996, respondent determined the following deficiencies in, and additions to, petitioners' Federal income taxes:Penalties Year Deficiency Sec. 6662(a)1Sec. 6663(a) 1989 $522,221 $104,444 $391,666 1990 334,663 66,933 250,997 1991 109,047 21,809 81,785 1992 103,224 20,645 77,4181 The sec. 6662(a) accuracy-related penalties were determined as an alternative to the sec. 6663(a) fraud penalties.Subsequently, by an amendment to answer, respondent asserted increased deficiencies and penalties for 1989 and 1991, as follows:Penalties Year Deficiency Sec. 6662(a) Sec. 6663(a) 1989 $877,054 1 $657,791 1991 153,214 1 114,911 1 20 percent of the underpayment to which this section applies.After concessions by each party, the issues remaining for decision are: (1) The value of shares of stock of Williamsburg Vacations, Inc. (WVI), awarded to Kay F. Gow (800 shares on February 16, 1989, and 400 shares on February 15, 1990) as bonuses; (2) whether WVI's payments of travel and entertainment expenditures for certain trips taken by petitioners constitute constructive dividends to them; (3) whether WVI's payments of expenditures for the procurement of an animal trophy collection constitute constructive dividends to petitioners; and (4) whether petitioners are liable for fraud penalties pursuant to section 6663(a), or in the alternative, accuracy-related penalties pursuant to section 6662(a).All section references are to the Internal Revenue Code as in effect for the years in issue. All Rule references are to the Tax Court Rules of Practice and Procedure. All dollar amounts are rounded.FINDINGS OF FACT Some of the facts have been stipulated and are so found. The stipulations of facts, stipulations of settled issues, and attached exhibits are incorporated herein by this reference.Background Petitioners, husband and wife, resided in Norfolk, Virginia, at the time they filed their petition.Kay F. Gow (Dr. Gow) earned a doctor of education (Ed.D.) degree from Virginia Tech., specializing in business education. As part of her curriculum she took courses in accounting. Before 1983, she taught and supervised a business education program at a public high school in Virginia. At the time of trial, Robert T. Gow (Mr. Gow) was a retired civil service employee. Williamsburg Vacations, Inc. (WVI) WVI was incorporated under the laws of Virginia on July 21, 1983. In November of 1986, WVI became a partner in a joint venture known as Powhatan Associates. (The other two members of the joint venture were Offsite International (Offsite) and Bush Construction Co. (Bush). None of the joint venturers were related; each held a one-third interest in Powhatan Associates.) During the years in issue, WVI's sole income-producing property was its indirect interest in Powhatan Plantation, a time-share resort project of Powhatan Associates.WVI was authorized to issue 50,000 shares of common stock. Initially, 650 shares of its stock were issued to Dr. Gow and 350 shares to Horace E. Henderson (Mr. Henderson). Dr. Gow exchanged previously acquired land located in North Carolina for her stock. Mr. Henderson exchanged his note with a face value of $192,230.1...See the full content of this document
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