Kondamodi S. Rao and B. Satyaveni Rao (1996)

T.C. Memo. 1996-500

UNITED STATES TAX COURT KONDAMODI S. RAO AND B. SATYAVENI RAO, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 4468-94. Filed November 6, 1996.

Sanford Amdur, for petitioners. Robert W. Mopsick, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION VASQUEZ, Judge: Respondent determined deficiencies in and additions to petitioners' Federal income tax as follows:

Additions to Tax Sec. Sec. Sec. Sec. Sec. Sec. 6653 6653 6653 6653 6653 6653 Sec. Year Deficiency (a)(1) (a)(1)(A) (a)(1)(B) (b)(1) (b)(1)(A) (b)(1)(B) 6661

1986 $65,075 --- $2,025 * --- $18,434 ** $16,269 1987 33,648 --- 453 * --- 18,448 ** 8,412 1988 24,644 $412 --- --- $12,296 --- --- 6,161 * 50 percent of the interest due on the portion of the underpayment due to negligence. ** 50 percent of the interest due on the portion of the underpayment due to fraud.

All section references are to the Internal Revenue Code in effect for the years in issue. All Rule references are to the Tax Court Rules of Practice and Procedure.

Petitioner Kondamodi S. Rao, hereinafter referred to as Dr. Rao or petitioner, omitted gross income from his sole proprietorship psychiatry practice in 1986, 1987, and 1988. Petitioners deducted losses on their joint Federal income tax returns in 1986, 1987, and 1988 from the operation of Forest Park Medical Center (the medical center). After concessions, the issues for decision are: (1) Whether Dr. Rao1 is liable for the additions to tax for fraud pursuant to section 6653(b)(1)(A) and (B) for 1986 and 1987 and section 6653(b)(1) for 1988; (2) whether petitioners have substantiated deductions from the operation of the medical center for 1986, 1987, and 1988 in amounts greater than that allowed by resp...

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