Corporation Challenges Denial Of Business Expense Deductions.
Carney Management Co., Inc. v. Commissioner
- CourtUnited States Tax Court
- DocketDocket No. 11708-93
- AuthorsGriffin, William F., Jr.
- Code Sections
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 93-75350
- Tax Analysts Electronic Citation93 TNT 150-67
Carney Management Co., Inc. v. Commissioner
CARNEY MANAGEMENT CO., INC.,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
====== SUMMARY ======
Carney Management Co., Inc., challenges the IRS's denial of business expense deductions for accounting fees and legal fees and the IRS's imposition of penalties for negligence and substantial understatement of tax.
Carney adds that it loaned an employee $15,000 and should receive a notes receivable deduction for it.
Period and Amount at Issue: 1989 -- $3,131
Code Section Classification: 162, 6653A, 6662
====== FULL TEXT ======
PETITION
The petitioner hereby petitions for a redetermination of the deficiency set forth by the Commissioner of Internal Revenue in his notice of deficiency dated March 9, 1993 and as a basis for its case alleges as follows:
1. The petitioner is a Massachusetts corporation with a principal place of business at 1600 Soldier's Field Road, Brighton, Massachusetts 02135. The petitioner's taxpayer identification number is 04-2901650. The return for the period here involved was filed with the office of the Internal Revenue Service at Andover, Massachusetts.
2. The notice of deficiency (a copy of which, including so much of the statement and schedules accompanying the notice as is material, is attached and marked Exhibit A), was mailed to the petitioner on March 9, 1993 and was issued by the District Director, Boston, Massachusetts.
3. The deficiencies as determined by the Commissioner are in income taxes for the calendar year 1989 in the amount of $3,131, all of which are in dispute.
4. The determination of tax set forth in said notice of deficiency is based upon the following errors:
(a) The Commissioner erred in determining that the amount
of $15,000 included in wages was not an ordinary and necessary
business expense.
(b) The Commissioner erred in determining that the amount
of $1,325 was improperly deducted as accounting fees.
(c) The Commissioner erred in determining that the amount
of $3,913 was improperly deducted as legal fees.
(d) The Commissioner erred in determining that the amount
of $637 was improperly deducted as a miscellaneous business
expense.
(e) The Commissioner erred in determining that the entire
underpayment of income taxes for the calendar year 1989 is due
to negligence or intentional disregard of rules and regulations.
(f) The Commissioner erred in determining that there was a
substantial understatement of income taxes for calendar year
1989 under Section 6662(a) of the Internal Revenue Code.
5. The facts upon which the petitioner relies, as the basis for its case, are as follows:
A. Wages - Notes Receivable Deduction.
1. During calendar year 1989, petitioner made a
$15,000 loan to Paul Gately, an employee. This loan was
evidenced by a demand note dated May 3, 1989. This payment
was included in amounts deducted as "wages" on the
petitioner's 1989 Federal income tax return.
2. Petitioner admits that the amount in question was
erroneously deducted as wages.
B. Accounting Fees.
1. During 1989, the petitioner made payments of $2,500
to Bergin & Crotty, CPA's for accounting services performed
for the petitioner and two related entities: Carco Realty
Limited Partnership and Carney Soldiers Field Road Realty
Corp.
2. The Commissioner determined that only $1,175 was
allocable to accounting work performed for the petitioner
and that the balance of $1,325 should be disallowed as
constructive dividend to its shareholder.
3. The amount deducted represents an ordinary and
necessary business expense incurred in the petitioner's
trade or business.
C. Legal Fees.
1. During 1989, the petitioner made payments of
$3,912.78 to Davis, Malm & D'Agostine for legal services.
2. The Commissioner determined that these amounts were
expenses of Carney Buick, Inc. ($723.50) and James Carney
($3,189.33) and were therefore not expenses of the
petitioner and should be disallowed.
3. The amount deducted represents an ordinary and
necessary business expense incurred in the petitioner's
trade or business.
D. Miscellaneous Expense.
1. During 1989, petitioner paid $300.00 to Pink
McDonald Harding and $337.35 to the Internal Revenue
Service.
2. The Commissioner determined that the former payment
was an expense of Carney Buick, Inc. and the latter for IRS
penalties, and were therefore not ordinary and necessary
business expenses of the petitioner.
3. The amount deducted represents an ordinary and
necessary business expense incurred in the petitioner's
trade or business.
E. Additional Deductions:
Petitioner asserts that deductions taken by related
taxpayers have been disallowed by the Commissioner on the
grounds that the deductions were not that taxpayer's
expense. Petitioner is allowed additional deductions to the
extent that deductions disallowed to related taxpayers
belong to the petitioner.
WHEREFORE, petitioner prays that this Court determine that no deficiencies in income tax exist for the calendar year 1989.
William P. Griffin, Jr.
Attorney for Petitioner
Davis, Malm & D'Agostine, P.C.
One Boston Place
Boston, Massachusetts 02108
(617) 367-2500
T.C. Bar No. GW0286
Dated: June 7, 1993
- CourtUnited States Tax Court
- DocketDocket No. 11708-93
- AuthorsGriffin, William F., Jr.
- Code Sections
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 93-75350
- Tax Analysts Electronic Citation93 TNT 150-67
