UNITED STATES TAX COURT
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T.C. Memo. 1996-218
UNITED STATES TAX COURT
M.S. FOOD STORES, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
FREDERICK MALCOLM SUTTON AND CAROLYN P. SUTTON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 11631-93, 11632-93.
Filed May 6, 1996.
A. Rexford Willis III, for petitioners.
James R. Rich, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
PARKER, Judge:
Respondent determined deficiencies in
Federal corporate income taxes, additions to tax, and a penalty
for petitioner M.S. Food Stores, Inc., as follows:
- 2 Taxable Year
Ending
Deficiency
6653(b)(1)
Sept. 30, 1986
Sept. 30, 1987
Sept. 30, 1988
Sept. 30, 1989
Sept. 30, 1990
$3,022
7,542
61,367
1,284
22,029
$1,511
----963
---
Additions to Tax Under Section
6653(b)(2)
6653(b)(1)(A)
6653(b)(1)(B)
*
---------
--$5,657
46,025
-----
--*
*
-----
Penalty
6663
--------$16,522
*Plus an addition of 50 percent of the interest due on the deficiency.
In the alternative, respondent determined additions to tax
and a penalty as follows:
Taxable Year
Ending
Sept. 30, 1986
Sept. 30, 1987
Sept. 30, 1988
--Sept. 30, 1989
Sept. 30, 1990
6651(a)(1)
Additions to Tax Under Section
6653(a)(1)(A) 6653(a)(1)(B) 6653(a)(1) 6653(a)(2)
Penalty
6661
6662(a)
--$1,506
5,985
--$377
3,068
--*
*
$151
-----
*
-----
----$15,342
-----
-----
-----
-----
64
---
-----
-----
--$4,406
*Plus an addition of 50 percent of the interest due on the deficiency.
Respondent determined deficiencies in Federal income taxes,
additions to tax, and penalties for petitioners Frederick Malcolm
Sutton and Carolyn P. Sutton as follows:
Year
Deficiency
1986
1987
1988
1989
1990
$25,141
48,241
31,139
24,860
23,716
Year
6653(b)(1)(A)
1986
1987
1988
1989
1990
$18,742
29,787
-------
6651(a)(1)
--$1,182
841
6,354
5,947
Additions to Tax Under Section
6653(a)(1)(A)
6653(a)(1)(B)
1
$8
496
-------
2
-------
Additions to Tax Under Section
6653(b)(1)(B)
6653(b)(1)
3
4
-------
----$18,590
-----
6661
--$3,597
2,651
-----
6653(a)(1)
----$368
----Penalty
6663
------$15,905
17,787
1
Plus an addition of 50 percent of the interest due on $103.
Plus an addition of 50 percent of the interest due on $5,309.
3
Plus an addition of 50 percent of the interest due on $24,989.
4
Plus an addition of 50 percent of the interest due on $38,317.
2
In the alternative, respondent determined additions to tax
and penalties as follows:
- 3 Year
6651(a)(1)
6653(a)(1)(A)
1986
1987
1988
1989
1990
--$11,111
7,038
6,354
5,947
$1,257
2,482
-------
Additions to Tax Under Section
6653(a)(1)(B)
6653(a)(1)
*
*
-------
----$1,607
-----
Penalty
6661
6662(a)
$6,285
12,060
7,785
-----
------$4,972
4,743
*Plus an addition of 50 percent of the interest due on the deficiency.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable years before
the Court, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
After concessions,1 the issues remaining for decision are:
(1) Whether petitioner M.S. Food Stores, Inc. (the corporate
petitioner), had unreported income from rebates and coupons in
its taxable years ending September 30, 1987, 1988, 1989, and
1990;
(2) whether the corporate petitioner had unreported gross
receipts in its taxable years ending September 30, 1987, 1988,
1989, and 1990;
(3) whether the corporate petitioner is liable for additions
1
On brief respondent has conceded the fraud additions to
tax and penalties for all years before the Court. Respondent has
also conceded that petitioner Carolyn P. Sutton is an innocent
spouse as to the unexplained bank deposits and disputed rebate
and coupon checks diverted from the corporate petitioner (grossly
erroneous items). Respondent further conceded that petitioner
Carolyn P. Sutton is an innocent spouse as to any additions to
tax predicated upon those income adjustments, provided that the
Court determines that the substantial understatements are in
amounts sufficient to satisfy the statutory requirements of sec.
6013(e)(1) through (4). The parties have made various other
concessions which are set out in their stipulations of fact and
which will be discussed in the text below.
- 4 to tax under section 6651(a)(1) for its taxable years ending
September 30, 1987, and 1988;
(4) whether the corporate petitioner is liable for additions
to tax for negligence for its taxable year ending September 30,
1986, under section 6653(a)(1) and (2); for its taxable years
ending September 30, 1987, and 1988, under section 6653(a)(1)(A)
and (B); and for its taxable year ending September 30, 1989,
under section 6653(a)(1); and for an accuracy-related penalty for
negligence for its taxable year ending September 30, 1990, under
section 6662(a);
(5) whether the corporate petitioner is liable for an
addition to tax under section 6661 for its taxable year ending
September 30, 1988;
(6) whether petitioners Frederick Malcolm Sutton and Carolyn
P. Sutton (the Suttons) had unreported income, in the taxable
years 1986, 1987, 1988, and 1990, from rebate and coupon checks
diverted from the corporate petitioner;
(7) whether the Suttons had additional unreported income, in
the taxable years 1986 through 1990, from diverted corporate
funds (unexplained bank deposits);
(8) whether the Suttons are liable for additions to tax
under section 6651(a)(1) for the taxable years 1987 through 1990;
(9) whether the Suttons are liable for additions to tax for
negligence for the taxable years 1986 and 1987 under section
6653(a)(1)(A) and (B); and for the taxable year 1988 under
- 5 section 6653(a)(1); and for accuracy-related penalties for
negligence for the taxable years 1989 and 1990 under section
6662(a); and
(10) whether the Suttons are liable for additions to tax for
the taxable years 1986, 1987, and 1988 under section 6661.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts, the supplemental stipulation of facts,
and the exhibits attached thereto are incorporated herein by this
reference.
The corporate petitioner had its principal place of business
in Kinston, North Carolina, at the time it filed its petition.
The Suttons resided in Kinston, North Carolina, at the time they
filed their petition.
The cases have been consolidated for
trial, briefing, and opinion.
The corporate petitioner operated a retail grocery store in
Kinston, North Carolina, during the years at issue.
Petitioner
Frederick Malcolm Sutton (Mr. Sutton) owned 100 percent of the
stock of the corporate petitioner.
Previously, his father,
Frederick Sutton (Fred Sutton), had owned and operated the
grocery business.
Mr. Sutton began working with his father at
the store when he was approximately 11 years old.
Mr. Sutton is a high school graduate and took some community
college courses in grocery management and butchering and meat
cutting.
Mr. Sutton has no education or training in accounting,
- 6 tax, or financial matters.
During the years 1986 through 1989, Mr. Sutton maintained a
personal checking account at NCNB National Bank (NCNB).
During
the years 1989 and 1990, the Suttons maintained a personal
checking account at First Citizens Bank & Trust Company (FCB).
The corporate petitioner had both checking and savings accounts
at FCB during its taxable years ended September 30, 1987 through
1990.
The bank statements covering the periods at issue for all
of the above checking accounts show numerous charges for checks
returned for insufficient funds.
Rebates and Coupons
The corporate petitioner received rebate checks from various
wholesalers or vendors.
Fred Sutton had initiated an accounting
procedure for the rebate checks whereby the amounts of such
rebate checks were to be recorded on the corporate petitioner's
sales summaries (known, and hereinafter referred to, as the green
sheets) in a column entitled "Rebates".
The corporate
petitioner's accountant reduced cost of sales by a credit
adjustment to purchase expenses; i.e., deducting the amount of
the rebates from the purchase expenses.
The corporate petitioner accepted coupons from its
customers.
The total cost of a grocery item was initially rung
up on the cash register, and then the coupon amount was rung up
on the cash register as a deduction from the customer's bill,
with the customer paying the balance.
The coupon amount was
- 7 deducted on the cash register tape, but the coupons themselves
were never added up by the corporate petitioner.
Periodically,
after the corporate petitioner accumulated enough coupons to fill
a large grocery bag about two-thirds full, it sent such coupons
to its wholesaler or vendor who would issue a check to the
corporate petitioner for the amount of the coupons.
The
corporate petitioner did not record the receipt of these coupon
checks on its books.
Judy Stroud of the accounting firm of
Woolard & Hale, the corporate petitioner's accountant, could not
recall ever discussing the accounting treatment of coupons and
did not appear to have any knowledge about the corporate
petitioner's treatment of the coupons or the coupon checks.
The corporate petitioner received checks for rebates from
five wholesalers or vendors during its taxable years ended
September 30, 1987 through 1990: Quinn Wholesale Company, Inc.
(Quinn), Eastern Coca Cola Bottling Company (Coke), Carolina
Dairies Corporation (Carolina Dairies), Philip Morris, and Nash
Finch Company (Nash Finch).
for both rebates and coupons.
Quinn and Nash Finch issued checks
Mr. Sutton indicated that the only
way he could distinguish the rebate checks from the coupon checks
was by the wholesaler's or vendor's name.
Only half of the
rebate checks were recorded on the corporate petitioner's books.
In a few instances, rebate checks had been credited toward the
corporate petitioner's purchase account with the vendor.
Approximately one-third of the coupon checks were recorded on the
- 8 corporate petitioner's books as rebates.
Many of these coupon and rebate checks were deposited into
the corporate petitioner's bank account.
A coupon check issued
by Quinn on August 26, 1988, in the amount of $502.44, was
deposited in the corporate petitioner's bank account on August
30, 1988, along with $500 in currency; change of $2.44 was
returned.
That amount of $502.44 was not included in the notice
of deficiency as part of the corporate petitioner's unreported
rebate amounts because it had been reported on the corporate
petitioner's tax return.
However, respondent included this
$502.44 as part of an unexplained corporate bank deposit made on
August 30, 1988.
The following chart sets out the source, amounts, and
disposition of the various rebate and coupon checks included in
the deficiency notice to the corporate petitioner:
Rebate/Coupon Checks:
TYE
Vendor
the Corporate Petitioner
Amount Credited
Amount Deposited
Amount in
on Vendor's Account
in Corporate Bank
Deficiency Notice (Conceded by Respondent)
Account
Amount
Cashed
9-30-87
Quinn
Coke
Carolina Dairies
Total:
$11,420.62
4,138.00
447.72
$16,006.34
-0$2,988.00
-0$2,988.00
$4,316.44
1,150.00
132.48
$5,598.92
$7,104.18
-0315.24
$7,419.42
9-30-88
Quinn
Coke
Carolina Dairies
Philip Morris
Total:
$10,647.07
11,083.75
1,757.86
819.00
$24,307.68
-0$1,625.00
-0-0$1,625.00
$4,413.88
9,458.75
1,757.86
819.00
$16,449.49
$6,233.19
-0-0-0$6,233.19
9-30-89
Quinn
Coke
Carolina Dairies
Philip Morris
Total:
$2,195.21
5,190.00
298.92
372.00
$8,056.13
$1,338.69
1,625.00
-0-0$2,963.69
$502.39
3,565.00
298.92
372.00
$4,738.31
$354.13
-0-0-0$354.13
9-30-90
Coke
Philip Morris
Nash Finch
Total:
$10,392.50
1,080.00
9,088.75
$20,561.25
$5,045.00
-04.92
$5,049.92
$5,347.50
1,080.00
8,334.64
$14,762.14
-0-0$749.19
$749.19
- 9 The record does not disclose what happened to the proceeds of the
above rebate/coupon checks that were cashed.
The record does not
disclose whether the above rebate/coupon checks that were
deposited in the corporate bank account were part of the store
deposits or part of the unexplained bank deposits.
The following chart sets out the source, amounts,
concessions by respondent, and disputed amounts of rebate/coupon
checks included in the deficiency notice issued to the Suttons:
Rebate/Coupon Checks:
the Suttons
Amount in
Deficiency Notice
Amount Conceded
by Respondent
Amount Still
in Dispute
Quinn
$6,279.00
$1,473.79
Coke
Carolina Dairies
2,088.00
244.00
$8,611.00
1,875.50
244.00
$3,593.29
$3,833.81
971.40
212.50
-0$5,017.71
1987
Quinn
Coke
Carolina Dairies
Philip Morris
$13,699.30
3,326.00
448.00
273.00
$17,746.30*
$2,636.85
3,326.00
132.76
273.00
$6,368.61
$11,062.45
-0315.24
-0$11,377.69
1988
Quinn
Coke
Carolina Dairies
Philip Morris
$8,288.00
12,709.00
2,021.00
546.00
$23,564.00
$5,658.95
12,709.00
2,021.00
546.00
$20,934.95
$2,629.05
-0-0-0$2,629.05
1989
Quinn
Coke
Carolina Dairies
Philip Morris
$1,841.00
5,348.00
36.00
372.00
$7,597.00
$1,841.00
5,348.00
36.00
372.00
$7,597.00
-0-0-0-0-0-
1990
Coke
Philip Morris
Nash Finch
$8,610.00
1,080.00
9,113.00
$18,803.00
$8,610.00
1,080.00
8,363.81
$18,053.81
-0-0$749.19
$749.19
Vendor
Year
1986
*The rebate amount in the deficiency notice is $16,516 for 1987, the amount from
Quinn that year being erroneously listed as $12,469 rather than the $13,699.30.
The amounts still in dispute represent checks made out to the
corporate petitioner that were cashed by Mr. Sutton.
The following rebate or coupon checks made out to the
corporate petitioner were cashed by Mr. Sutton:
- 10 -
Issuer
Date of
Check
Amount
Quinn
01-22-86
$3,833.81
-
-86
01-01-87
01-26-87
03-16-87
04-23-87
08-14-87
09-18-87
10-16-87
12-11-87
01-22-88
04-01-88
11-15-88
Coke
05-
Disposition
$833.81 deposited in Mr. Sutton's personal NCNB account, $3,000 in
cash withheld by Mr. Sutton
971.40 $900 deposited into Mr. Sutton's personal NCNB account, $71.40 in
cash withheld by Mr. Sutton
1,354.35 $1,000 deposited in Mr. Sutton's personal NCNB account, $354.35 in
cash withheld by Mr. Sutton
1,363.41 Cashed by Mr. Sutton
1,451.04 Cashed by Mr. Sutton
1,032.40* Cashed by Mr. Sutton
1,047.67 Cashed by Mr. Sutton
1,355.31 Cashed by Mr. Sutton
868.41 Cashed by Mr. Sutton
3,089.86 Cashed by Mr. Sutton
1,379.27 Cashed by Mr. Sutton
895.65 Cashed by Mr. Sutton
354.13 Cashed by Mr. Sutton
-86
212.50
Cashed by Mr. Sutton
Carolina Dairies 08-05-87
315.24
Cashed by Mr. Sutton
Nash Finch
749.19
Cashed by Mr. Sutton
03-16-90
*$500 of this amount was reported on the corporate return and only $532.40 was taxed to the Suttons.
The record does not show what happened to the proceeds of these
rebate and coupon checks.
The Suttons did not report any of
these amounts on their individual tax returns.
Checks to or on Behalf of the Corporate Petitioner
During the calendar years 1986 through 1990, Mr. Sutton
wrote personal checks to, or for the benefit of, the corporate
petitioner as summarized below.2
Year
Deposited in Corporate
Bank Account
Cashed
Written to
Vendor
Disposition
Unknown
Total
Amount
1986
1987
1988
1989
1990
$84,400
113,500
51,832
45,651
39,625
$2,900
21,000
----2,000
--$2,000
--2,606
900
$17,500
----1,000
1,500
$104,800
136,500
51,832
49,257
44,025
A few of these checks were written to third parties; the majority
were payable to "Sutton Food Stores" and were deposited in the
corporate petitioner's bank account.
2
Many of the checks
Amounts are rounded to the nearest whole dollar.
- 11 deposited in the corporate petitioner's bank account were part of
the store deposits; i.e., those deposits into the corporate
petitioner's checking acount that were recorded as deposits on
the green sheets.
Accordingly, those amounts are not part of the
unexplained bank deposits of the corporate petitioner.
Among the
checks included above, those checks relating to deposits other
than the store deposits include the following:3
Date
Check Number
Amount
05-19-89
11-24-89
12-01-89
12-21-89
12-29-89
0109
0195
0203
$3,000
3,000
4,000
10,000
20,000
As to his personal checks to the corporate petitioner that were
cashed, Mr. Sutton did not know the specific disposition of the
proceeds of those personal checks.
Fred Sutton also wrote checks to the corporate petitioner
which, during the years before the Court, included the following.
Date
Amount
08-19-88
04-21-90
09-20-90
$10,000
500
11,000
On August 19, 1988, the corporate petitioner made a deposit of
$10,000 to its bank account in addition to the store deposit for
that date.
3
We cannot determine that the other two checks from
We have not included those checks where it is clear that
respondent either did not include the related deposits in the
unexplained deposits or has conceded them.
- 12 Fred Sutton were deposited into the corporate account other than
as part of the store deposits.
Personal Resources
Mr. Sutton claimed that he obtained personal loans from
Charles W. Palmer, an elderly man who has known Mr. Sutton for
the latter's entire life.
Mr. Palmer did not charge Mr. Sutton
interest on these alleged loans, although Mr. Palmer did charge
interest to others to whom he made loans.
These loans were
allegedly made in cash by Mr. Palmer and repaid in cash by Mr.
Sutton.
Mr. Sutton testified that he would write a check to Mr.
Palmer for the amount of the loan, that Mr. Palmer would hold
that check until the loan was repaid, that on the back of that
check, the dates and amounts of Mr. Sutton's payments would be
recorded,4 and that, usually, the payments were weekly and in
amounts of $500, but sometimes they would be $1,000.
Neither Mr.
Palmer nor Mr. Sutton had any contemporaneous records of these
alleged loans.
Once a loan was repaid, Mr. Palmer allegedly
would return the check to Mr. Sutton, and Mr. Sutton would tear
4
Mr. Sutton testified that Mr. Palmer recorded the
payments on the back of the check. Mr. Palmer testified that he
never wrote anything, and that Mr. Sutton kept the checks and
made the payment notations. The Court did not believe the
testimony of either Mr. Palmer or Mr. Sutton in regard to these
alleged loans. Mr. Palmer testified that he kept up to $100,000
in a metal box and that he lent out money from that box over and
over again without any interest. The Court found his testimony
to be inherently incredible.
- 13 it up.
In two instances, Mr. Sutton wrote checks to Mr. Palmer,
both dated January 15, 1988, and both in the amount of $5,000,
which Mr. Palmer negotiated in March and June of 1988.
Mr. Sutton wrote the following checks from the Suttons'
personal checking accounts which were endorsed by Mr. Palmer:
Date
01-15-88
01-15-88
11-24-89
12-15-89
12-22-89
12-29-89
01-05-90
01-11-90
Payee
Charlie Palmer
Charlie Palmer
Cash
Cash
Cash
Cash
Cash
Cash
Amount
Negotiated
$5,000
5,000
500
500
500
500
500
500
03-10-88
06-02-88
On or before 11-27-89
On or before 12-18-89
On or before 12-22-89
12-29-89
On or before 01-08-90
On or before 01-12-90
The Court is not persuaded that Mr. Palmer made any loans to Mr.
Sutton.
See supra note 4.
Mrs. Sutton's father died on January 1, 1987.
Mrs. Sutton
was the sole beneficiary of his estate (the estate) which had a
net value of $408,093.34.
Mr. Sutton was the executor of the
estate.
Mrs. Sutton received four distributions from the estate's
checking account totaling $100,000 that she loaned to the
corporate petitioner.
Of this amount, $90,000 was deposited in
the corporate petitioner's bank account during January of 1987.
Whether or when the remaining $10,000 was deposited is not shown
by the record.
Mrs. Sutton received another $2,500 distribution
from the estate on March 31, 1987, which was deposited in the
corporate petitioner's checking account.
Other distributions
from the estate were as follows; the date of distribution and
- 14 disposition are stated where known:
Date
Amount
Disposition
01-18-87
02-17-87
03-24-87
04-14-87
05-18-87
$11,690.38
3,000.00
5,000.00
7,780.00
1,040.00
1,144.22
3,806.19
14,610.66
8,746.74
8,560.38
10,021.27
15,134.11
12,540.54
16,383.00
9,114.63
614.37
Paid to FCB
Cashed
Cashed
Paid to Gay Construction Company
Paid for rental property repairs
Deposited in Mr. Sutton's NCNB account
Nationwide Money Market
Nationwide Credit Union
Deposited in Mr. Sutton's NCNB account
Deposited in Mr. Sutton's NCNB account
Deposited in Mr. Sutton's NCNB account
Deposited in Mr. Sutton's NCNB account
Cashed
During the years before the Court, the Suttons paid the
following expenses by check or cash:
Payee or Item
Amount
1986
Parrott Academy
Gay Construction
American Express
Walnut Creek Country Club
City of Kinston (taxes)
Lenoir County (taxes)
$4,665.87
2,200.00
1,682.50
808.08
883.47
1,045.39
1987
1987 Chevy
22 ft. boat
Ford T-bird
Home improvements
Jewelry
Church sign
American Express
Parrott Academy
$10,515.00
22,000.00
4,284.00
10,502.06
4,206.21
7,030.00
8,334.29
5,738.33
1988
Ford Truck
Items for boat
$11,400.00
4,816.59.
In 1988, the Suttons traded in the boat they had purchased in
1987 for one costing $12,688.08; they also received $9,603.10 in
that trade.
Corporate Accounting and Financial Statements
The handwritten green sheets prepared by Mr. Sutton were the
- 15 sole record of income for the corporate petitioner.
The totals
of sales for each month were totaled at the bottom of the green
sheets for that month.
the green sheets:
The following column headings appeared on
Date, Register, Food Stamps, Rebates, Cash,
Paid Outs, Balance, Cash on Hand, Tax, Deposit, Savings, and
Count.5
One row of information appeared for each business day of
that month.
The green sheets were prepared using the daily cash
register reconciliations from one to four cash registers.
However, no register tapes or cash register reconciliations were
provided to the accounting firm or submitted into evidence.
According to Mr. Sutton, the figures in the column entitled
"Register" represented total sales or gross receipts before
coupons were deducted.6
The entries under "Cash" represented the
sum of "Register" plus "Rebates".
from "Cash" to arrive at "Balance".
"Paid Outs" were subtracted
"Cash on Hand" represented
actual money, checks, and money equivalents such as vouchers and
5
There is no explanation in the record as to the last
column heading.
6
The full price of the grocery item was rung up on the
cash register, but then the coupon amount was deducted on the
cash register tape. Without the cash register tapes or the cash
register reconciliations, it is not possible to verify whether
the total sales or gross receipts figures listed on the green
sheets included or excluded coupon amounts. Since the Court did
not find Mr. Sutton to be a credible witness, the Court is
unwilling to accord much weight to his self-serving and wholly
unsupported testimony. With a retail grocery business involving
a lot of cash receipts and with Mr. Sutton's practice of dealing
in cash and failing to distinguish between his pockets and those
of his corporation's business, the absence of the cash register
tapes is particularly troublesome.
- 16 food stamps; i.e., items that can be taken to the bank.7
"Deposit" was the deposit made to the corporate petitioner's
checking account; the deposit amounts were usually rounded
figures that did not correlate with the "cash on hand" figures.
"Savings" was used to record taxes such as payroll and sales
taxes accumulated but not yet due to the particular government
agency.
These tax amounts were not necessarily deposited in the
corporate petitioner's savings account on the dates indicated on
the green sheets; some were deposited as much as a month or
longer after the date of the entry on the green sheet.
Examples
of these delayed deposits are:
Amount
Green Sheet
Deposited
$3,473.23
3,710.84
3,582.41
3,351.64
3,097.63
2,768.09
2,866.69
06-25-88
07-02-88
07-07-88
07-10-88
10-01-88
11-12-88
12-03-88
07-27-88
07-27-88
07-27-88
07-27-88
03-16-89
03-17-89
03-31-89
Ms. Stroud prepared the corporate petitioner's monthly
financial statements based on the green sheets and the corporate
petitioner's bank statements.
She did not have the cash register
tapes, cash register reconciliations, or the bank deposit slips.
During the process of completing the monthly accounting for the
corporate petitioner, Ms. Stroud contacted Mr. Sutton if she had
any questions.
7
"Cash on hand" did not include coupon amounts or employee
I.O.U.'s for grocery charges that would be deducted from the
employee's paycheck.
- 17 Mr. Sutton did not document any funds that he contributed to
or that he withdrew from the corporate petitioner.
There were no
promissory notes, repayments schedules, or other documentation of
any loans to or from him.
Mr. Sutton did not tell Ms. Stroud
about any funds he contributed, other than to answer any specific
questions she asked him.
Ms. Stroud would post any deposits Mr. Sutton identified as
being from him, as well as any unexplained deposits, as a credit
to Account 135-Loan to Shareholder (Account 135).
Nearly all of
the credits to Account 135 are marked as "deposits".
Ms. Stroud
would also charge to Account 135 any personal items of the
Suttons paid by the corporate petitioner and any unexplained
shortages.
The following yearend adjusting journal entries were
made charging Account 135 in order to reconcile cash on hand to
the actual cash balance:
TYE
Amount
09-30-87
09-30-88
09-30-89
09-30-90
$89,930.05
49,872.72
3,730.00
18,717.41
The yearend adjustment for 1987 bears the notation "assumed went
to Malcolm Sutton since it did not go to Savings Acct."
The corporate petitioner's unaudited financial statements
for October 1, 1985, through September 30, 1989, do not mention
any liabilities owed to Mr. Sutton.
To the contrary, these
financial statements show the following:
- 18 TYE
09-30-86
09-30-87
09-30-88
09-30-89
Loans Receivable
Stockholder Fred Sutton
$42,760.61
$ 1,536.17
136,158.90
148,637.57
128,877.95
Loans Payable
Mrs. Sutton
Fred Sutton
$1,000.00
---
2,536.17
2,536.17
2,536.17
$87,964.71
60,505.01
59,908.40
--12,000.00
57,000.00
The corporate petitioner reported liabilities to commercial
lenders on these financial statements.
The corporate petitioner's U.S. Corporation Income Tax
Returns show the following amounts at the end of the respective
taxable years:
TYE
Loans to Shareholder
09-30-86
09-30-87
09-30-88
09-30-89
09-30-90
$42,760.61
136,158.90
148,637.57
128,877.95
110,262.77
Loans from Shareholder*
-0$87,964.71
60,505.01
59,908.40
59,908.40
*These were actually loans from Mrs. Sutton who was not a
shareholder.
The Suttons' North Carolina Intangible Personal Property Tax
Returns for the years 1987 through 1990 do not show any loans
from Mr. Sutton to the corporate petitioner, nor do they show any
loans from the corporate petitioner to Mr. Sutton.
Those
intangibles returns do reflect a $90,000 loan from Mrs. Sutton to
the corporate petitioner; the value of that debt at the end of
each year was indicated as:
Year
Value
1987
1988
1989
$60,505.01
60,505.01
59,908.40
- 19 1990
59,908.40
Mr. Sutton signed a personal financial statement for FCB
dated April 10, 1986, stating the Suttons' net worth as $588,600.
This statement indicates $18,000 in notes due from friends,
relatives, or affiliated companies.
Mr. Sutton signed another
financial statement for FCB on May 23, 1987, stating the Suttons'
net worth as $844,000.
This 1987 statement indicates $27,000 in
notes due from friends, relatives, or affiliated companies.
Neither financial statement lists any liabilities other than
notes payable to banks.
Federal Income Tax Returns
The Woolard & Hale firm prepared the tax returns of the
corporate petitioner and the Suttons for the years at issue.
The
corporate petitioner's Federal income tax returns for taxable
years ending September 30, 1987, and September 30, 1988, were
due, under extension, and filed on the following dates:
Taxable Year Ending
Due
Filed
September 30, 1987
September 30, 1988
June 15, 1988
June 15, 1989
June 15, 1988
February 9, 1989
Respondent determined in the notice of deficiency to the
corporate petitioner that the extensions for those years were
invalid, since the balance due was materially understated.
The Suttons' Federal income tax returns for 1987 through
1990 were due, under extension, and filed on the following dates:
- 20 Year
Due
Filed
1987
1988
1989
1990
October 17, 1988
October 15, 1989
October 15, 1990
August 15, 1991
December 5, 1988
November 13, 1989
August 30, 1991
August 15, 1991
Respondent determined in the notice of deficiency to the
individual petitioners additions to tax for delinquency computed
without regard to the extensions of time.
Petitioners relied almost entirely on their accountants for
purposes of taking care of the corporate petitioner's monthly and
yearly books and financial records, and corporate and personal
tax returns.
For the corporate petitioner, Ms. Stroud relied
upon the green sheets prepared by Mr. Sutton and the corporate
bank statements.
It is not clear what materials the individual
petitioners furnished to Ms. Stroud for the preparation of their
individual tax returns.
However, Ms. Stroud did not have the
Suttons' personal bank statements when she prepared their
returns.
Respondent's Determinations
The Corporate Petitioner
Respondent reconstructed the corporate petitioner's income
for its taxable years ended September 30, 1987 through 1990,
based on the accounting and bank records that were available.
Revenue Agent Joseph Board (Mr. Board) compiled a list of
specific unexplained bank deposits for the corporate petitioner's
taxable years ended September 30, 1987 through 1989.
Those
- 21 unexplained deposits do not include the store deposits.
Respondent adjusted the corporate petitioner's income as
follows:
Item
9/30/86
Purchase Rebates
Gross Receipts
Contributions
NOL Deduction
Taxable Year Ending
9/30/87
9/30/88
9/30/89
9/30/90
$16,007
41,039
(1,320)
$20,561
73,608
(728)
$24,308
180,913
(1,247)
$8,056
41,220
(843)
$35,851
5,909
Respondent has since conceded the amounts of those rebate
checks that were credited to the corporate petitioner's accounts
payable at the respective vendors, where net costs were used in
calculating cost of sales, and has conceded some receipts.
The
amounts of respondent's concessions are (rounded to the nearest
dollar):
Item
09-30-87
Taxable Year Ending
09-30-88
09-30-89
09-30-90
$2,988
-0-
$1,625
46,413
$5,050
-0-
Rebates and coupons
Gross receipts
$2,964
5,987
The Suttons
Mr. Board examined the Suttons' bank records and compiled a
list of specific unexplained deposits which respondent included
in the Suttons' income.
The yearly totals of these unexplained
deposits to the Suttons' personal bank accounts over the 5-year
period are:
- 22 Year
Amount
Number of
Deposits
1986
1987
1988
1989
1990
$63,008
83,403
53,550
60,541
62,650
51
52+
35+
25
57
Respondent also included the amounts of all rebate and coupon
checks issued to the corporate petitioner that were not accounted
for in the corporate petitioner's income.
Respondent since has
conceded amounts representing such rebate/coupon checks that were
shown to have been deposited in the corporate petitioner's bank
account.
Other adjustments are reflected in the concessions
listed below.
Respondent has conceded (rounded to the nearest dollar) the
following:
Item
Rebate/coupons
Annuity
IRA Distribution
Interest Income
Dividend Income
Tax on IRA
Dependency Exemption
1986
1987
$3,593
$6,369
1,080
1,900
1988
1989
1990
$20,935 $7,597
13,067*
14,337*
239*
140*
1,434
1,950
$18,054
*Respondent concedes those items because the Suttons had
already conceded them during the audit, and those items should
not have been included in the notice of deficiency.
The Suttons have conceded that they failed to report on
their individual income tax returns the following:
Item
Dividend Income
1986
1987
1989
$180
$120
---
- 23 Capital Gain
Annuity Received by Mrs. Sutton
Inherited IRA
Interest Income
65
-------
--13,065
23,579
605
--$13,068
-----
OPINION
The Corporate Petitioner
Rebate and Coupon Checks
The corporate petitioner acknowledges that rebates are to be
considered in calculating its income.
In some instances, the
corporate petitioner recorded rebates as a reduction to cost of
sales and in other instances, where rebates had been credited
against amounts owed to wholesalers, the corporate petitioner
reflected the net costs.
Respondent agrees with that treatment.
To the extent, however, that the proceeds of rebate checks were
not accounted for by either of those methods, we hold that the
corporate petitioner had unreported income from rebate checks.8
In other words, if the rebate checks did not in some way reduce
cost of sales, then the cost of sales was overstated, and the
gross income was correspondingly understated.
The parties also agree that the coupons result in income;
they disagree, however, as to the proper treatment of that
income.
8
Respondent has determined that the corporate
Petitioners have speculated that some rebate checks may
have been rung up on the register, thereby being included in
income twice, once in cash register gross receipts and again as a
result of reducing cost of sales as a rebate. Petitioners have
not established any such instances.
- 24 petitioner's income should be increased by the amounts of those
coupon checks not previously recorded in the corporate
petitioner's books as rebates.
The corporate petitioner argues
that the value of the coupons was included in income as a
component of gross receipts and, therefore, should not be
included again upon receipt of the coupon checks.
The corporate
petitioner has failed to establish the factual predicate for its
argument.
We cannot find that the coupon amounts were initially
included in the gross receipts ("register") figures on the green
sheets.
No cash register tapes or reconciliation records were
submitted.
The amount of income received from coupons was not
accounted for as a separate item on the corporate petitioner's
green sheets or any other books or records.
Accounting practices
were inconsistent, some coupon checks being recorded as rebates
on the green sheets.
Ms. Stroud from the accounting firm knew
nothing of the accounting procedures for coupons or coupon
checks.
The corporate petitioner has not met its burden of
showing respondent's determination to be incorrect.
Therefore,
we sustain respondent's determination, as adjusted by
respondent's concessions, which are detailed in the Findings of
Fact above.
Unexplained Bank Deposits
Every person liable for tax is required to keep books and
- 25 records sufficient to establish the amount of such taxpayer's
income.
Sec. 6001;
DiLeo v. Commissioner, 96 T.C. 858, 867
(1991), affd. 959 F.2d 16 (2d Cir. 1992).
Where a taxpayer fails
to maintain adequate books or records, the Commissioner may
determine the taxpayer's income by, among other methods, the bank
deposits method.
Mallette Bros. Construction Co. v. United
States, 695 F.2d 145 (5th Cir. 1983); DiLeo v. Commissioner,
supra.
Bank deposits are prima facie evidence of income.
Mills
v. Commissioner, 399 F.2d 744, 749 (4th Cir. 1968), affg. T.C.
Memo. 1967-67; Clayton v. Commissioner, 102 T.C. 632, 645 (1994);
DiLeo v. Commissioner, supra at 868.
The taxpayer has the burden
of proving that the Commissioner's determination is incorrect.
Rule 142(a); Mills v. Commissioner, supra at 749; Clayton v.
Commissioner, supra at 645.
The corporate petitioner argues that its unexplained bank
deposits consist entirely of funds advanced by Mr. Sutton to
provide the corporate petitioner with sufficient working capital.
The corporate petitioner includes in these funds cash loans Mr.
Sutton allegedly received from Mr. Palmer.
The Court is not
persuaded that Mr. Palmer made any loans to Mr. Sutton, let alone
that such "loans" account for the corporate petitioner's
unexplained bank deposits.
The corporate petitioner asserts that
the proceeds of all of Mr. Sutton's personal checks to the
corporate petitioner that were cashed eventually ended up as
- 26 deposits.
On the whole, that has not been established.
The totals of the personal checks Mr. Sutton wrote to or on
behalf of the corporate petitioner are summarized in the Findings
of Fact above.
However, most of the personal checks that were
deposited were part of the store deposits and, thus, do not
reduce the corporate petitioner's unexplained bank deposits.
Those checks that were deposited separately from the store
deposits and that do not constitute income to the corporate
petitioner are listed separately in the Findings of Fact above.
As for the proceeds of personal checks that were cashed, Mr.
Sutton could not remember their specific disposition and, thus,
could not correlate their proceeds to the unexplained bank
deposits.
Checks written to third parties do not explain bank
deposits.
There is no credible evidence of any cash
contributions from Mr. Sutton to the corporate petitioner, either
from any of his personal funds or from any funds deriving from
Mr. Palmer.
Both the corporate petitioner and the individual petitioners
allege that Mr. Sutton loaned small amounts to the corporate
petitioner regularly and withdrew small amounts regularly, in
essence, alleging that the same funds were loaned and repaid over
and over.
They argue that respondent has distorted the corporate
petitioner's income by summing the amounts advanced without
subtracting the repayments.
Petitioners point to Ms. Stroud's
- 27 reconciliations as reflecting the net effect to the corporate
petitioner and thus a more accurate picture.
On the contrary, Ms. Stroud's knowledge of these alleged
loan transactions was limited, restricted by Mr. Sutton himself.
The failure to document these transactions must weigh against
petitioners.
We have considered all deposits attributable to Mr.
Sutton to the extent made possible by the record before us.
The parties have stipulated that Mrs. Sutton loaned a total
of $100,000 to the corporate petitioner during 1987; yet, we are
unable to ascertain whether the last $10,000 installment was ever
deposited in the corporate bank account.
Similarly, Fred Sutton
provided funds to the corporate petitioner.
However, the Fred
Sutton checks were included in the store deposits in part.
The
remaining Fred Sutton funds (the August 19, 1988 check for
$10,000) were conceded by respondent.
Therefore, the Fred Sutton
funds do not assist in reducing the remaining unexplained bank
deposits.
However, the delayed deposits to the corporate petitioner's
savings account for taxes, as described in the Findings of Fact
above, do serve to account for unexplained deposits on March 16,
17, and 31, 1989.
Also, respondent listed an unexplained deposit
of $14,000 on July 27, 1988.
For that date, the corporate
petitioner's bank statement shows a withdrawal of $14,000 and a
deposit in the amount of $14,118.12.
The latter deposit
- 28 represents the total of four delayed savings deposits, also
detailed in the Findings of Fact above.
The unexplained bank
deposits should be reduced by those amounts.
Both the corporate petitioner and the individual petitioners
argue that the proceeds of the rebate and coupon checks that were
cashed ended up in the corporate petitioner's bank deposits and
have been included by respondent in income twice.
Other than
self-serving speculation, petitioners have not provided any
information as to the disposition of these cashed checks.
Such
cash proceeds may have been part of the store deposits and
already excluded from the unexplained bank deposits.
Since we
are unable to determine how much, if any, was deposited and
unable to distinguish such cash from the other items deposited,
we cannot find as fact that the proceeds of these cashed rebate
and coupon checks were included in the unexplained bank deposits.
However, there is evidence of the August 30, 1988, deposit of the
$502.44 check from Quinn within an unexplained deposit of $1,000
on that day, and the corporate petitioner's income should be
adjusted accordingly.
Additions to Tax under Section 6651(a)(1)
Section 6651(a)(1) imposes an addition to tax for failure to
file a return on the date prescribed (determined with regard to
any extension of time for filing), unless it is shown that such
failure is due to reasonable cause and not due to willful
- 29 neglect.
This addition to tax is 5 percent of the tax required
to be shown on the return per month of such failure, up to 25
percent.
Sec. 6651(a)(1).
Respondent has determined that the
corporate petitioner's extensions of time to file for taxable
years ending September 30, 1987 and 1988 were invalid and that
the corporate petitioner is liable under this section.
The corporate petitioner asserts that the extensions for
both years were valid, but offers no proof and no argument other
than that respondent did not prove the extensions to be invalid.
The corporate petitioner has the burden of proof to show the
additions are improper.
United States v. Boyle, 469 U.S. 241,
245 (1985); Funk v. Commissioner, 687 F.2d 264, 266 (8th Cir.
1982), affg. T.C. Memo. 1981-506.
The Commissioner may void an
extension where the taxpayer's request for extension is invalid
because of a failure to properly estimate tax liability.
v. Commissioner, 92 T.C. 899, 911 (1989).
Crocker
The corporate
petitioner has not shown it made a bona fide and reasonable
estimate of its tax liability at the time the requests for
extension were made.
We hold for respondent on this issue.
Additions to Tax and Penalties for Negligence
Respondent has determined that all of the corporate
petitioner's underpayments for the years at issue were due to
negligence or disregard of rules or regulations and imposed an
- 30 addition to tax or penalty for each year.9
In contesting these
additions and penalty, the corporate petitioner relies primarily
on its position that no deficiency exists, but does argue that
any deficiency due to unreported rebates was due to Mr. Sutton's
lack of education and understanding of accounting practices.
Negligence is the lack of due care or the failure to do what
a reasonable and prudent person would do under the circumstances.
Neely v. Commissioner, 85 T.C. 934, 947 (1985).
For purposes of
the accuracy-related penalty under section 6662, the term
"negligence" also includes any failure to make a reasonable
attempt to comply with the Internal Revenue Code, and the term
"disregard" includes any careless, reckless, or intentional
disregard.
Sec. 6662(c).
We find the corporate petitioner to be
negligent in its failure to maintain full and accurate records of
its financial transactions during the years at issue.
Mr. Sutton
failed to disclose fully to Ms. Stroud the information she needed
to keep proper records and file accurate returns.
her was not reasonable.
Reliance on
Ma-Tran Corp. v. Commissioner, 70 T.C.
9
The additions to tax and penalty are under the following
sections:
TYE
09-30-86
09-30-87
09-30-88
09-30-89
09-30-90
Sections
Sec. 6653(a)(1) and (2)
Sec. 6653(a)(1)(A) and (B)
Sec. 6653(a)(1)(A) and (B)
Sec. 6653(a)(1)
Sec. 6662(a)
- 31 158, 173 (1978).
We sustain respondent's determination that the
corporate petitioner was negligent with respect to its
underpayments.
Addition to Tax under Section 6661
Respondent has determined an addition to tax under section
6661 for substantial understatement of tax for the corporate
petitioner's taxable year ended September 30, 1988.
This
addition applies when the understatement of income tax of a
corporate taxpayer exceeds the greater of (1) 10 percent of the
tax required to be shown on the return for the taxable year, or
(2) $10,000.
Sec. 6661(b)(1).
The understatement for purposes
of this addition shall be reduced where there is substantial
authority for the tax treatment of any item or if there was
adequate disclosure, in or attached to the return, of the
relevant facts affecting any item.
Sec. 6661(b)(2)(B).
The corporate petitioner has presented no argument in
objection to this addition.
Since the amount of the
understatement for the taxable year ended September 30, 1988, is
substantial, we sustain respondent's determination on this issue.
The Suttons
Rebate and Coupon Checks
Respondent contends that Mr. Sutton diverted the proceeds of
the cashed rebate and coupon checks from the corporate petitioner,
thereby receiving constructive dividends.
Petitioners allege that
- 32 all of the proceeds were used by the corporate petitioner, but
argue that if any such proceeds are found to be used by the
Suttons, such funds should be characterized as repayments of loans
Mr. Sutton made to the corporate petitioner.
Some of the proceeds of these cashed checks were deposited
into the Suttons' personal bank account.
happened to the remainder.
It is not known what
On the record before us, we conclude
that Mr. Sutton retained these funds for his personal use.
Rule
142(a).
Sections 301 and 316 provide that a distribution of property
made by a corporation with respect to its stock is a taxable
dividend to the extent of its earnings and profits.
When a
shareholder receives an economic benefit from the corporation
without an expectation that that benefit be repaid, the
shareholder has received a constructive dividend.
Williams v.
Commissioner, 627 F.2d 1032, 1034 (10th Cir. 1980), affg. T.C.
Memo. 1978-306.
However, where a shareholder has made a loan to
the corporation, the corporation's repayment of that loan would
not be taxable to the shareholder.
Theodore v. Commissioner, 38
T.C. 1011, 1040-1041 (1962).
In order for any monies that Mr. Sutton may have retained
from these cashed rebate and coupon checks to be repayments from
the corporate petitioner to Mr. Sutton, there must have been a
bona fide loan from Mr. Sutton to the corporate petitioner.
- 33 Donisi v. Commissioner, 405 F.2d 481 (6th Cir. 1968), affg. T.C.
Memo. 1967-62.
Whether a transaction between a shareholder and
his closely held corporation represents a bona fide indebtedness
must be determined based on the facts and circumstances
surrounding the transaction.
Electric & Neon, Inc. v.
Commissioner, 56 T.C. 1324, 1338-1339 (1971), affd. without
published opinion 496 F.2d 876 (5th Cir. 1974).
The shareholder's
mere statement that he considered the distributions to be
repayments of loans is not sufficient to show that the intrinsic
economic nature of the transactions themselves is that of a debt
rather than a constructive dividend.
Williams v. Commissioner,
supra; Alterman Foods, Inc. v. United States, 505 F.2d 873, 876877 (5th Cir. 1974); Cordes v. Commissioner, T.C. Memo. 1994-377.
The only records of funds transferred between Mr. Sutton and
the corporate petitioner were the limited books of the corporate
petitioner; i.e., the financial statements and the corporate tax
returns.
These records indicated that Mr. Sutton owed the
corporation for funds loaned to him, not vice versa.
Ms. Stroud
recorded any bank deposits identified as advances from Mr. Sutton
as reductions in what Mr. Sutton owed the corporate petitioner,
not as loans from him.
There were no promissory notes, repayment
schedules, interest charges, or other credible evidence of any
loans from Mr. Sutton to his corporation.
It follows that the
cash proceeds of the rebate and coupon checks were constructive
- 34 dividends to Mr. Sutton.
Donisi v. Commissioner, supra; Cordes v.
Commissioner, supra.
Unexplained Bank Deposits
Mr. Sutton argues that the unexplained bank deposits in his
personal bank account consist of repayments of his loans to the
corporate petitioner, the proceeds of checks cashed by the store,
loans from Mr. Palmer, and cash distributions from the estate, all
of which would be nontaxable sources.
The factual predicate for
that argument has not been established.
We cannot find that Mr. Sutton made any loans to the
corporate petitioner.
Thus, any payments out of the corporation
to him cannot be repayment of loans.
Ms. Stroud's entries to
Account 135 support respondent's position, indicating that Mr.
Sutton withdrew greater amounts of money than any amounts he may
have contributed.
Mr. Sutton has not argued that the funds he
withdrew from the corporate petitioner were intended to be loans
from the corporate petitioner.
States, supra at 877 n.7.
See Alterman Foods, Inc. v. United
We conclude that any funds that Mr.
Sutton withdrew from the corporate petitioner were constructive
dividends.10
We are unable to attribute any of the unexplained bank
deposits in the Suttons' bank accounts to the proceeds of personal
10
Petitioners have not presented argument or proof that any
distributions would be nontaxable due to the limitations of the
corporate petitioner's earnings and profits.
- 35 checks cashed by the corporate petitioner, since we cannot
distinguish checks that may have been handled in this fashion.
We
cannot find that the Suttons received any funds from Mr. Palmer.
We have found that the Suttons received funds from the estate;
yet, we are unable to trace such funds to the remaining
unexplained bank deposits in the Suttons' personal bank account.
In summary, petitioners have failed to prove that any of the
Suttons' unexplained bank deposits derived from nontaxable
sources.
The individual petitioners argue that they should not have to
include the proceeds of the cashed rebate and coupon checks in
addition to the unexplained bank deposits, as this would be double
counting.
Since the disposition of the cash proceeds is unknown,
we cannot find that they were part of the unexplained bank
deposits.
Additions to Tax under Section 6651
Respondent has determined additions to tax for late filing
for the Suttons' taxable years 1987 through 1990.
The Suttons
applied for extensions in each of these years and, for years 1987
through 1989, filed their returns after the respective due dates
as extended.
They admit that the returns for 1987 through 1989
were filed after the due dates as extended, and if a deficiency
should be found for any of these years, that some addition would
apply for each of those years.
However, they assert that the
- 36 extensions for 1987 though 1990 were valid and argue that the
addition should only apply from the respective due dates as
extended.
The Suttons have not shown they made a bona fide and
reasonable estimate of their tax liability at the time the
requests for extension were made.
We hold for respondent on this
issue.
Additions to Tax and Penalties for Negligence
Respondent has determined that all of the Suttons'
understatements for the years at issue were due to negligence or
disregard of rules or regulations.11
The individual petitioners
have argued only that they correctly reported their income and
were not otherwise negligent.
We disagree.
They have presented
no specific evidence that they acted as would a reasonable and
ordinarily prudent person under the circumstances.
We sustain
respondent on the negligence issue.
Addition to Tax under Section 6661
Respondent has determined additions to tax for substantial
11
The additions to tax and penalties are under the
following sections:
Year
Sections
1986
1987
1988
1989
1990
Sec. 6653(a)(1)(A) and (B)
Sec. 6653(a)(1)(A) and (B)
Sec. 6653(a)(1)
Sec. 6662(a)
Sec. 6662(a)
- 37 underpayment for the Suttons' taxable years 1986 through 1988.
An
understatement of tax by an individual taxpayer is substantial if
it exceeds the greater of 10 percent of the tax required to be
shown on the return or $5,000.
Sec. 6661(b)(1)(A).
The Suttons have presented no arguments on this issue other
than to deny the underlying deficiencies.
We sustain respondent
as to the additions under section 6661.
In keeping with the above and the concessions of the parties,
Decisions will be entered
under Rule 155.
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