Manning v. Commissioner
| Citation | 65 T.C.M. 2221 |
| Decision Date | 30 March 1993 |
| Docket Number | Docket No. 4920-90.,Docket No. 4917-90.,Docket No. 6117-90.,Docket No. 6116-90. |
| Parties | Francis P. Manning and Audrie C. Manning, et al.<SMALL><SUP>1</SUP></SMALL> v. Commissioner. |
| Court | United States Tax Court |
Harry Barbin, 608 Huntingdon Pike, Rockledge, Pa., for the petitioners. Keith Gorman, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined the following deficiencies and additions to tax for petitioners Francis P. Manning and Audrie C. Manning, and petitioner corporation Francis P. Manning, M.D., Ltd.:
Individual Petitioners
Additions To Tax
Sec
Years Deficiency Sec. 6653(a)(1)1 6653(a)(2)1 Sec. 6661
1981 .................... $ 11,394.00 $ 570,00 2 $ --
1982 .................... 25,394.34 1,269,72 2 6,348.59
1983 .................... 83,579.00 4,354.00 2 20,895.00
1984 .................... 126,517.00 6,326.00 2 31,629.00
1985 .................... 142,731.00 7,137.00 2 35,683.00
Additions To Tax
Years Sec. 6651(a)(1)1 Sec. 6653(b)(1) Sec. 6653(b)(2)
1981 .................... $ -- $ 5,697.00 --
1982 .................... -- 12,697.17 2
1983 .................... 2,783.00 41,789.50 2
1984 .................... -- 63,258.00 2
1985 .................... -- 71,365.00 2
Corporate Petitioner
Additions To Tax
Sec
Years Deficiency Sec. 6653(a)(1)1 6653(a)(2)1
1982 .................... $ 9,734.50 $ 486.72 2
1983 .................... 8,134.00 407.00 2
1984 .................... 6,488.00 324.00 2
1985 .................... 7,400.00 370.00 2
Additions To Tax
Sec. Sec
Years 6651(a)(1)1 6653(b)(1) Sec. 6653(b)(2)
1982 .................... $ 486.73 $ 4,867.25 2
1983 .................... -- 4,067.00 2
1984 .................... 324.00 3,244.00 2
1985 .................... 370.00 3,700.00 2
1 Sec. 6653(a)(1) and (2) and 6651 additions are alternative to the additions determined under sec. 6653(b)(1)
and (2)
2 Fifty percent of the interest due on the entire deficiency
After concessions, the following issues remain for decision:
A. Petitioner Corporation
1. Whether petitioner corporation may deduct travel and entertainment expenses for 1982, 1983, and 1984, or automobile expenses and depreciation, net operating losses, business promotion expenses, and disability and life insurance expenses for 1982 through 1985. We hold that it may not.
2. Whether petitioner corporation may deduct meetings and seminars expenses for 1982 through 1985. We hold that it may deduct some of these expenses, as decided below.
3. Whether petitioner corporation is entitled to a $1,878 investment tax credit for 1984. We hold that it is not.
4. Whether petitioner corporation may adjust its earnings and profits for accrued but unpaid income taxes and penalties. We hold that it may not.
B. Individual Petitioners
1. Whether petitioners may deduct Old Spanish Trail property expenses for 1985. We hold that they may not.
2. Whether petitioners may deduct charitable contributions for 1983, 1984, and 1985. We hold that, of the amounts in dispute, they may deduct $50 in 1983, $175 in 1984, and $250 in 1985.
3. Whether petitioners received constructive dividends from petitioner corporation of $41,897 in 1982, $55,172 in 1983, $59,272 in 1984, and $53,661 in 1985. We hold that they did.
4. Whether petitioners received distributions in excess of earnings and profits of $21,070 in 1981 and $10,550 in 1985, and whether these amounts are taxable as capital gains to petitioners in the respective amounts of $8,428 and $4,220. We hold that to the extent the distributions petitioners received exceed earnings and profits for those years they are taxable as capital gains.
5. Whether petitioners are entitled to a rehabilitation credit for 1984 and to depreciation before April 2, 1984, for the Clinton Avenue property. We hold that they are not.
6. Whether petitioners are liable for the addition to tax for substantial understatement of tax under section 6661 for 1982 through 1985. We hold that they are.
C. Petitioner Corporation and Individual Petitioners
1. Whether the notices of deficiency are arbitrary and capricious. We hold that they are not.
2. Whether assessment of tax for petitioners for 1981 is barred by the statute of limitations. We hold that it is not.
3. Whether petitioners are liable for additions to tax for fraud under section 6653(b) for 1981, and whether petitioners and petitioner corporation are liable for fraud under section 6653(b)(1) and (2) for 1982 through 1985. We hold that petitioner corporation is, and that petitioners Francis P. Manning and Audrie C. Manning are in part.
All references to petitioner are to Francis P. Manning, to petitioner wife are to Audrie C. Manning, to petitioners are to the individual petitioners, and to petitioner corporation are to Francis P. Manning, M.D., Ltd. All section references are to the Internal Revenue Code in effect for the years at issue. All Rule references are to the Tax Court Rules of Practice and Procedure.
TABLE OF CONTENTS
Findings of Fact
A. Petitioner Corporation
1. Petitioners ................................................................. 2223
2. Petitioner's Radiology Practice at Nazareth Hospital ........................ 2224
3. Tax Return Preparation ...................................................... 2224
4. Travel and Entertainment .................................................... 2224
5. Meetings and Seminars ....................................................... 2225
6. Automobile Expenses ......................................................... 2227
7. Disability and Life Insurance Expenses ...................................... 2227
B. Individual Petitioners
1. Charitable Contributions .................................................... 2228
2. Clinton Avenue Property ..................................................... 2228
3. Old Spanish Trail Property .................................................. 2228
4. Petitioners' and Petitioner Corporation's Tax Returns ....................... 2229
Opinion
A. Petitioner Corporation
1. Travel and Entertainment Expenses ........................................... 2230
2. Meetings and Seminars Expenses .............................................. 2231
3. Automobile Expenses and Depreciation ........................................ 2233
4. Life Insurance Expenses ..................................................... 2233
5. Net Operating Losses ........................................................ 2233
6. Investment Tax Credit ....................................................... 2234
7. Corporate Distributions and Earnings and Profits ............................ 2234
B. Individual Petitioners
1. Charitable Contributions .................................................... 2234
2. Clinton Avenue Property ..................................................... 2235
3. Old Spanish Trail Property .................................................. 2236
4. Constructive Dividends ...................................................... 2236
C. Petitioner Corporation and Individual Petitioners
1. Whether the Deficiency Determination Was Arbitrary and Capricious ........... 2237
2. Statute of Limitations for 1981 ............................................. 2237
3. Additions to Tax for Fraud .................................................. 2238
4. Substantial Understatement Under Section 6661 ............................... 2241
Petitioners were married in 1953 and lived in Huntingdon Valley, Pennsylvania, when the petitions were filed.
Petitioner has bachelor's degrees in science, chemistry, and medicine from various universities in North Dakota. He went to medical school for 2 years at the University of North Dakota and 2 years at Temple University. During the years at issue, he practiced radiology at Nazareth Hospital in Philadelphia.
Petitioners have four children: Miles, Barbara Holt, Patricia Kissel, and Kathalyn Allen (Kathalyn). Kathalyn attended Wilkes College in Wilkes-Barre, Pennsylvania, from August 1977 until June 1982.
Nazareth Radiology, Inc. (NRI), operated the radiology department of Nazareth Hospital. Before July 1981, the shareholders of NRI were petitioner and Drs. Joseph Beres, Joseph Clarke, and Frank Gregor.
On July 1, 1981, petitioner formed Francis P. Manning, M.D., Ltd. (petitioner corporation). Petitioner corporation's principal place of business was in Huntingdon Valley, Pennsylvania, when the petitions were filed. On July 1, 1981, Drs. Clarke and Gregor also formed their own corporations. Dr. Beres became the sole shareholder of NRI. Drs. Robert Lantieri and Douglas Cole began working as radiologists at Nazareth Hospital around 1982 and 1985, respectively. MRI contracted with Drs. Clarke, Gregor, Lantieri, Cole, and petitioner to perform radiological services during the years in issue.
In March 1980, petition...
To continue reading
Request your trial