Winston Knauss, (2005)

Docket Number: 12878-01, 7328-02

Linked as:

Extract

Winston Knauss, (2005)

T.C. Memo. 2005-6

UNITED STATES TAX COURT WINSTON KNAUSS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket Nos. 12878-01, 7328-02. Filed January 18, 2005.

F. Pen Cosby, for petitioner.

Ronald T. Jordan and Angela J. Kennedy, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION GALE, Judge: By notice of deficiency dated August 10, 2001, respondent determined an income tax deficiency and fraud penalty under section 6663(a)1 with regard to petitioner's 1997 taxable year. By notice of deficiency dated January 23, 2002, respondent determined income tax deficiencies and fraud penalties under section 6663(a) with respect to petitioner's 1991, 1994, 1995, and 1996 taxable years. Petitioner timely petitioned for redetermination with respect to both notices, and the cases covering each were consolidated for trial, briefing, and opinion. The deficiencies and fraud penalties determined were as follows:

Penalty Year Deficiency Sec. 6663(a) 1991 $4,323 $3,242

1994 88,012 66,009

1995 182,387 136,790

1996 173,624 130,218

1997 185,155 139,616

After concessions,2 the issues for decision in these cases ('this case') are: (1) Whether petitioner understated gain on the sale of yachts in 1994, 1996, and 1997 by $155,848, $527,074, and $615,119, respectively; (2) whether petitioner understated gain from the sale of real property in 1995 by $232,400; (3) whether petitioner had unreported income from his yacht charter business in 1994, 1995, and 1996 of $68,350, $190,615, and $34,544, respectively; (4) whether petitioner failed to report income of $92,420, $36,000, and $13,000 in 1994, 1996, and 1997, respectively, from the settlement of lawsuits; (5) whether petitioner's wholly owned S corporation, Winston Development, Inc., overstated deductions on its 1995 Federal income tax return by $54,802; (6) whether there was an underpayment of tax in 1991; and (7) whether the underpayments of tax in 1991, 1994, 1995, 1996, and 1997 were due to fraud.

FINDINGS OF FACT Some of the facts have been stipulated and are incorporated into our findings by this reference.

Petitioner was a resident of Ft. Lauderdale, Florida, when the petitions were filed.

Petitioner's Background Petitioner is a high school graduate. He initially held a variety of construction jobs before becoming trained to be a construction project estimator.

In 1968, petitioner started a demolition business that he operated successfully for 20 years. His business interests grew to include apartment buildings, a hotel, and a country club. In 1988, petitioner organized Winston Development, Inc. (WDI),3 an S corporation, to build and sell condominiums in Indiana. At all relevant times, petitioner owned 100 percent of the stock of WDI.

In the mid-1980s, petitioner also became successfully engaged in the business of chartering yachts for 'dinner cruises' in Ft. Lauderdale, Florida. In the 1990s, petitioner had several...

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