department of the treasury int ernal revenue service washington d c o f f i c e o f c h i e f c o u n s e l date number release date cc pa apjp tl-n-7433-00 uilc internal_revenue_service national_office field_service_advice memorandum for area_counsel financial services healthcare cc lm fsh man from james c gibbons chief branch administrative provisions and judicial practice cc pa apjp subject refund claims this chief_counsel_advice responds to your memorandum dated date in accordance with sec_6110 this chief_counsel_advice should not be cited as precedent legend taxpayer year year year year year year year year date date date dollar_figurea dollar_figureb c d tl-n-7433-00 e f issue sec_1 whether timely refund claims filed on date were specific or general claims whether refund claims submitted on date after the running of the statute_of_limitations under sec_6511 of the internal_revenue_code were amendments of the date claims or new claims whether audit activity by the service regarding the date claims constituted a waiver that would allow consideration of those claims conclusion sec_1 the date refund claims should be regarded as specific claims to the extent they relate to contracts not taken into account by the taxpayer in preparing the date claims the date claims should be considered new claims the service’s audit activity regarding the date claims did not waive any available objections to the timeliness of those claims facts the following facts are those found by the examination team s involved in reviewing refund claims filed by the taxpayer any additions to or changes in these facts could affect the conclusions set forth below under law and analysis on date the taxpayer filed timely claims for refunds of income taxes for year sec_1 through by filing forms 1120x with the appropriate service_center the date claims in these forms the taxpayer claimed refunds totaling dollar_figurea but stated that the amount refunded should be any greater or lesser amount as may be legally due each of the date claims included a statement providing the service with details concerning the basis for the claims the taxpayer stated that in its originally filed corporate_income_tax returns it had generally not claimed research credits for research activity performed under various fixed-price contracts and was now claiming additional research credits under sec_41 sec_30 in the case of the claims filed for year sec_1 and tl-n-7433-00 the taxpayer asserted in the date claims that its research activities under the contracts should not be regarded as funded under applicable internal_revenue_service regulations and that all of the qualified_research_expenses qres incurred pursuant to such contracts should qualify for the research_credit the date claims did not state the number of contracts that formed the basis for the refund claims following receipt by the service of the date claims the service and the taxpayer agreed that processing of the claims would be delayed pending issuance of a ruling by the united_states_court_of_appeals_for_the_federal_circuit on an appeal from the united_states court of federal claims the taxpayer was not a party to the case pending before the federal_circuit but the outcome of that case could have affected the taxpayer’s entitlement to the refund requested in the date claims following the year issuance of the federal circuit’s opinion the taxpayer informed the service that it wished to undertake a second review of the fixed-price contracts it performed during years the taxpayer requested that the service take no action on the date claims pending this review and the service agreed to this request early in year the taxpayer engaged a consulting firm to study taxpayer’s entitlement to certain research_and_development credits this engagement produced the date claims on date after the statute_of_limitations for claiming refunds for year sec_1 through expired the taxpayer submitted the results of the consulting firm’s study to the service the study increased the taxpayer’s sec_41 and sec_30 refund claims from the dollar_figurea noted in the date claims to approximately dollar_figureb along with the results of the consulting firm’s study the taxpayer submitted a list of contracts for which the study was claiming qres and an explanation of the methodology used by the firm to create the study based upon the consultant’s study the taxpayer claims qres arising from a total of c contracts in the study the consultants reviewed a total of d contracts following the review of these d contracts the consultants stated they had developed a methodology which could extrapolate the findings on the d contracts to the remaining total of e contracts d e c where c total number of contracts covered by the date claim on date the service began an audit of the date claims by issuing certain information and document requests idrs the service and the taxpayer initially agreed that the service would review a small percentage of the d contracts analyzed in the consultant’s study subsequently the service requested and received information on each of the d contracts analyzed by the consultants in their study tl-n-7433-00 while carrying out its audit of the date claims the service sought to clarify the number of contracts included in the taxpayer’s timely date claims early in year the taxpayer advised the service that the date claims sought research credits arising from a total of f contracts this number may be subject_to a slight increase the taxpayer believes all of the credits attributable to contracts not included in the date claims should be refunded the taxpayer did not advise the service that more than f contracts generated qres for years until the statute_of_limitations on refund claims for those years had expired thus although the date claims did not specify the number of contracts involved they were in fact based on f contracts plus a slight potential adjustment and the service was told only after the running of the statute that c contracts actually generated qres for year sec_1 through law and analysis sec_6402 provides that the secretary within the applicable_period of limitations may credit the amount of an overpayment_of_tax including interest against any internal revenue tax_liability of the person who made the overpayment and shall refund the balance to the person sec_6511 provides that no refund may be allowed or made after the expiration of the period of limitation for filing a claim_for_refund unless a claim_for_refund is filed by the taxpayer within such period in general the period of limitation under sec_6511 for filing a refund claim is three years from the time the return was filed or two years from the time the tax was paid whichever is later sec_7422 prohibits any suit or proceeding in any court for a refund of taxes unless a claim_for_refund has been filed with the secretary in the manner prescribed in regulations established by the secretary sec_301_6402-2 of the procedure and administration regulations identifies the following general requirements that must be satisfied for the filing of a proper refund claim with minor exceptions the claim must be filed with the service_center where the tax was paid reg sec_301_6402-2 the claim must set forth in detail each ground upon which a credit or refund is claimed and facts sufficient to apprise the commissioner of the exact basis thereof reg sec_301 b the statement of the grounds and the facts must be verified by a written declaration made under the penalties of perjury sec_301_6402-2 except as provided with respect to income_tax and certain other taxes the claim is to be made on a form_843 reg sec_301_6402-2 and in the case of income gift and federal unemployment taxes a separate claim is to be made for each type of tax for each taxable_year or period reg sec_301_6402-2 tl-n-7433-00 sec_301_6402-2 of the procedure and administration regulations further provides that no refund_or_credit will be allowed after the expiration of the statutory period of limitations applicable to the filing of a claim therefor except upon one or more of the grounds set forth in a claim filed before the expiration of such period sec_301_6402-3 of the procedure and administration regulations provides in general in the case of an overpayment of income taxes a claim for credit or refund of such overpayment shall be made on the appropriate form here form 1120x the date claims should be regarded as specific not general refund claims the courts have described general refund claims as those which assert generally that an overpayment has occurred but lack supporting facts or reasons see 302_us_517 288_us_62 specific claims by contrast identify the particular transactions or factual circumstances underlying the refund request see united_states v andrews u s pincite the date claims should be regarded as specific and not general claims those claims specifically identified the factual basis for the refund request namely research activities the taxpayer performed under fixed price contracts the taxpayer stated in the date claims that all of the qualified_research costs incurred pursuant to such contracts are eligible for the research_credit in light of this specific reference to the circumstances generating the refund request the date claims should not be regarded as a general statement that overpayments have occurred accordingly those claims would not constitute general claims as that term is defined in the relevant case law as noted above the date claims stated that if applicable law supported such a revision the refund of dollar_figurea requested in those claims should be adjusted upward or downward please note that inserting such language in a refund claim will not cause an otherwise specific claim to be considered a general claim united_states v andrews u s pincite moreover the fact that the date claims failed to specify the number of contracts involved would not justify describing those claims as general a general claim is essentially a conclusory statement that an amount of tax has been overpaid the date claims directed the service’s attention to the particular circumstances allegedly justifying a refund and thus involved no such conclusory assertions of an overpayment the date claims should be regarded as new claims to the extent they are based upon contracts the taxpayer did not take into account in formulating the date claims tl-n-7433-00 as noted above the statute_of_limitations under sec_6511 for filing a refund claim with the service expired before the taxpayer submitted the date claims therefore the issue is whether these claims were amendments to the timely date claims or new claims if they were new they were untimely under sec_6511 and should be rejected if they instead amended the date claims the date claims should be considered by the service along with the date claims see eg 105_f2d_183 u s t c cch 2d cir held otherwise untimely refund claims which merely amend earlier timely claims are properly joined with the earlier claims after the statute_of_limitations on refund claims has expired a taxpayer may amend the original claim with information that the service would have naturally ascertained in the course of its investigation 190_fsupp_591 u s t c cch n d cal see also 93_fsupp_107 u s t c cch d mass pink v united_states f 2d pincite the taxpayer argues that the service in the course of investigating the date claims would have discovered the information reflected in the date claims cases such as pink however set a high standard for proving what the results of an investigation would be a taxpayer must show that the matters it states in an amended claim would naturally caswell or necessarily pink and true bros have been discovered by the service via its review of the original timely claim the facts of the present case do not appear to satisfy this standard the date claims were based on approximately f contracts whereas the date claims involved c contracts the service conceivably could have discovered the additional contracts via a broad investigation of the date claims since those claims did not explicitly state that only f contracts were involved in light of the significant factual differences between the date and date claims however there are no grounds for concluding that the service would naturally or necessarily have ascertained the matters set forth in the date claims via its investigation of the date claims accordingly to the extent the date claims take into account contracts which did not form the basis for the date claims the date claims should be considered new claims under pink and the other authorities cited above case law does indicate that if a late-filed amended claim relies upon the same facts as a timely claim the amendment may constitute an acceptable clarification of the original see true bros inc v united_states f_supp pincite held untimely claim seeking carry-over adjustments based on same facts asserted in timely claim was permissible amendment similarly if the service already knew of the matters asserted in an amended claim because it had actually investigated the original timely claim the amendment could be a permissible clarification of the tl-n-7433-00 original see 78_fsupp_111 u s t c cch the present case does not pose either of these situations the original claim was not investigated prior to submission of the amended claim and the facts underlying the amended claim c contracts generating qres differ from those underlying the original claim f contracts generating qres the service’s audit activity with respect to the date claims did not constitute a waiver allowing consideration of those claims the final issue you raise is whether the service’s considerable audit activity regarding the date claims waives any otherwise-available grounds for rejecting those claims numerous cases have held that if a refund claim fails to comply with the service’s regulations concerning the form or content of a claim that defect may be waived by the service see eg 325_us_293 558_f2d_596 u s t c cch such waivers are typically granted by means of the service examining the merits of the claim see eg angelus milling co u s pincite ________________ case law indicates that a general claim may be amended following the running of the statute_of_limitations to supply the missing information that caused the claim to be classified as general see eg united_states v memphis cotton oil co u s pincite as noted above however the date claims in the present case should be regarded as specific claims therefore the guidance in cases such as memphis cotton oil regarding amendment of general claims following the expiration of the statute would not apply here assume for example that the service regarded the date claims as general claims that failed to supply the detail required by the regulations under sec_6402 the service could waive such a defect by processing the claims the issue in the present case however is not whether the date or date claims failed to comply with applicable regulations the service challenges the date claims as untimely under sec_6511 the statutory deadlines for submitting a refund claim to the service unlike certain regulatory requirements applicable to refund claims cannot be waived by the service 302_us_528 see also missouri pacific r r co v united_states f 2d pincite the taxpayer in missouri pacific r r co argued that the service waived its tl-n-7433-00 right to demand adherence to the statutory deadline for filing a refund claim the court held as follows in rejecting this contention the requirements imposed by treasury regulations must be distinguished from those imposed by statute the former requirements may be waived while the latter may not in the instant case we are concerned with the statutory requirement of filing a timely claim_for_refund imposed by sec_7422 under the applicable law that requirement cannot be waived id because the service lacks authority to waive the statute_of_limitations under sec_6511 its audit activity regarding the date claims cannot have such effect case development hazards and other considerations this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse effect on privileges such as the attorney client privilege if disclosure becomes necessary please contact this office for our views please call if you have any further questions


t c memo united_states tax_court eddie cordes inc et al petitioners v commissioner of internal revenue respondent docket nos filed date qo christopher meyers for petitioners gary l bloom for respondent memorandum findings_of_fact and opinion marvel judge in separate notices of deficiency respondent determined the following income_tax deficiencies and ‘cases of the following petitioners are consolidated herewith eddy b and ellen k cordes docket no joseph p and jean ann richard docket no john j and sue e cordes docket no eddie cordes inc successor by merger with cordes finance corp docket no and edmund j and june j cordes docket no - - penalties with respect to petitioners’ federal income taxes docket no eddie cordes inc accuracy-related_penalty year deficiency sec_6662 a dollar_figure dollar_figure big_number big_number big_number big_number docket no fddy b and ellen k cordes accuracy-related_penalty year deficiency sec_6662 a dollar_figure dollar_figure big_number big_number docket no joseph p and jean ann richard accuracy-related_penalty year deficiency sec_6662 dollar_figure dollar_figure big_number docket no john j and sue e cordes accuracy-related_penalty year deficiency sec_6662 dollar_figure dollar_figure big_number big_number all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure monetary amounts are rounded to the nearest dollar docket no fddie cordes inc successor by merger with cordes finance corp accuracy-related fraud penalties penalties year deficiency sec_6662 a sec_6663 dollar_figure -0- dollar_figure big_number dollar_figure docket no edmund j and june j cordes accuracy-related fraud penalties penalties year deficiency sec_6662 a sec_6663 dollar_figure dollar_figure dollar_figure big_number big_number separate petitions were filed contesting respondent’s determinations these cases present common issues of fact and law and were consolidated for trial briefing and opinion pursuant to rule a after concessions the only issues for decision are whether any of the individual petitioners received constructive dividends from cordes finance corp cfc and or eddie cordes inc eci in and or and if so in what amounts whether interest earned on certain notes in and is properly included in cfc’s or edmund j cordes’s mr many issues in these consolidated cases have been settled or conceded by the parties or are deemed by this court to be conceded other issues raised by the parties are computational in nature in the interest of space these conceded deemed conceded computational and settled issues and their respective dispositions are set forth in appendix summary of conceded deemed conceded computational and settled issues we incorporate those dispositions into our opinion by this reference q4e- cordes’s income and if properly included in mr cordes’s income whether that interest is income from self-employment whether cfc may properly deduct from income repossession costs in and whether any of the petitioners are liable for the accuracy-related_penalty pursuant to sec_6662 for or and whether cfc and mr cordes are liable for the fraud_penalty pursuant to sec_6663 for or findings_of_fact some of the facts have been stipulated the stipulation of facts and the two supplemental stipulations of facts are incorporated herein by this reference except as specifically noted below at the time the petitions in these cases were filed eci’s principal_place_of_business was in lawton oklahoma eddy ben and ellen k cordes resided in lawton oklahoma joseph p and jean ann richard resided in lawton oklahoma john j and sue e cordes resided in austin texas and edmund j and june j cordes the cordeses resided in lawton oklahoma eddy ben cordes jean ann richard and john cordes are the cordeses’ children we refer to the cordeses together with their children as the cordes family it corporate ownership eci was incorporated in oklahoma in date as an authorized dealership for jeep-eagle vehicles cfc was incorporated in date and operated mainly to finance new - - and used vehicles purchased by customers from eci and other car dealerships owned by mr cordes in cfc merged into eci with eci surviving as the successor_corporation during the taxable years at issue members of the cordes family held legal_title to all the shares of stock in cfc and eci on date jean ann richard and john cordes each held legal_title to percent of the shares of stock in cfc and june j cordes mrs cordes held legal_title to the remaining percent of the shares of stock in cfc on date mrs cordes transferred her legal_title to eddy ben cordes cordes v commissioner tcmemo_2002_124 no further transfers of stock in cfc took place in the years at issue at all times during the years at issue eddy ben cordes held legal_title to percent of the shares of stock in eci mr cordes exercised complete control_over cfc and eci the corporations during the taxable years at issue mr cordes controlled all of the corporations’ operations and made all decisions pertaining to the timing amount and character of the distributions at issue herein all corporate decisions that would typically be made by shareholders---including who would hold legal_title to the shares of stock in the corporations and for how long--were made by mr cordes the record owners had no knowledge of the corporations’ day-to-day operations did not authorize or disapprove of any of the distributions at issue and in many cases were not aware of those distributions -- - robert hinman c p a of stanfield o’dell p c prepared cfc’s eci’s the cordeses’ john cordes’s and eddy ben cordes’s tax returns for the years at issue michael mayhall of godlove mayhall et al attorneys prepared jean ann richard’s tax returns for the years at issue il constructive dividends respondent determined that one or more of the individual petitioners received constructive dividends in the years at issue from cfc and or eci specifically respondent determined that the individual petitioners in each docket’ received the following constructive dividends from the following corporations source of distribution ecl diversion of checks from unidentified loans dollar_figure dollar_figure diversion of tag refunds big_number big_number excess payoffs big_number big_number cash distributions to mr cordes --0- total from eci big_number respondent claims that the constructive dividends arose from certain transactions between cfc and or eci and the members of the cordes family wherein the shareholder s received economic benefit s from the corporation or corporations without an expectation of repayment because respondent was initially unable to determine which individual petitioner received each constructive_dividend respondent determined to protect the government’s interest that each of the individual petitioners received the constructive_dividend in full cfc cash distributions to john cordes dollar_figure -0- cash distributions to jean ann richard big_number dollar_figure cash distributions to mrs cordes big_number big_number sale of and notes big_number big_number diversion of checks from bad_debts big_number -0- diversion of unbooked cfc income big_number --q- unexplained source of funds big_number big_number total from cfc big_number big_number total constructive dividends big_number big_number below we set out the facts relevant to respondent’s determinations regarding constructive dividends a constructive dividends from eci diversion of checks from unidentified loans diversion of tag refunds and excess payoffs petitioners concede that the amounts respondent determined eci distributed as diverted checks on unidentified loans diverted tag refunds and excess payoffs constitute constructive dividends to eci’s shareholder s for and cash distributions to mr cordes in eci issued checks to mr cordes in the amounts of dollar_figure and dollar_figure eci recorded the amounts of the checks in its paid-in capital_account -the dollar_figure was a check made payable to john cordes although the parties stipulated that it was a cash distribution to edmund j cordes we treat it as a cash distribution of dollar_figure to john cordes and we refer to it as such ‘the parties refer to these items as diversion of checks from chapter the parties have failed to explain fully the significance of chapter and we surmise by a careful review of the record that these checks were paid to cfc from chapter trustees representing funds cfc received as a creditor to bankruptcy estates - - b constructive dividends from cfc cash distributions to john cordes on date cfc issued to john cordes a check for dollar_figure on that same day mr cordes or someone on his behalf endorsed the check for dollar_figure over to cfc and cfc deposited the check in its own account cfc recorded this transaction as a liability in cfc’s account titled note payable--john j cordes john cordes’s loan account during cfc issued checks totaling dollar_figure to john cordes each was charged to john cordes’s loan account john cordes returned to cfc dollar_figure of the dollar_figure received ’ during cfc issued checks totaling dollar_figure to john cordes rach was charged to john cordes’s loan account six of the checks totaling dollar_figure were deposited in mrs cordes’s personal checking account john cordes failed to report the dollar_figure distribution or any of the other_payments as any type of income in or he did however report dollar_figure of interest_income from cfc in also on date john cordes transferred to mr cordes legal_title to shares of stock in john cordes inc this transaction was recorded in the minutes of special meeting of shareholders of john cordes inc ‘the record does not disclose the circumstances regarding john cordes’s return of funds to cfc or the manner in which the transaction was reported on cfc’s books the circumstances are not relevant in light of our holding --- - cash distributions to jean ann richard on date cfc issued to jean ann richard a check for dollar_figure and recorded that transaction as a debit to account no titled notes payable--edmund cordes inc this record was subsequently changed and the transaction was recorded as a debit to cfc’s asset account titled stock--edmund cordes inc on date mr cordes or someone on his behalf endorsed the check for dollar_figure over to cfc and cfc deposited the check in its own account cfc recorded this transaction as a liability in cfc’s account titled note payable--jean ann cordes jean ann richard’s loan account during cfc issued checks totaling dollar_figure to jean ann richard each was charged to jean ann richard’s loan account during cfc issued checks totaling dollar_figure to jean ann richard each was charged to jean ann richard’s loan account four of the checks totaling dollar_figure were deposited in mrs cordes’s personal checking account jean ann richard failed to report the dollar_figure distribution or any of the other_payments as any type of income in or also on date jean ann richard transferred to cfc legal_title to big_number shares of stock in edmund cordes inc this sjean ann cordes is the same person as jean ann richard we refer to this person as jean ann richard throughout this opinion wherever appropriate -- - transaction was recorded in the minutes of special meeting of shareholders of edmund cordes inc cash distributions to mrs cordes during cfc issued checks totaling dollar_figure to mrs cordes during cfc issued five checks totaling dollar_figure to mrs cordes those checks were deposited into mrs cordes’s personal checking account in the year in which they were issued additionally the six checks totaling dollar_figure charged to john cordes’s loan account and the four checks totaling dollar_figure charged to jean ann richard’s loan account were also deposited in mrs cordes’s personal checking account in in each of and one of the checks issued to mrs cordes was in the amount of dollar_figure and each year cfc deducted those dollar_figure payments as interest_expenses and mrs cordes reported the payments as interest_income the remainder of the checks issued to mrs cordes were charged to account no a shareholder loan account in the cordeses’ name bargain sale of notes in the years at issue cfc was in the trade_or_business of financing auto purchases each note cfc issued to a purchaser was recorded on a ledger card and eventually in a computer as cfc received each payment on a note cfc recorded that payment on the ledger card and issued a receipt to the borrower during mr cordes used dollar_figure of his own money to pay off a number of cfc’s outstanding notes mr cordes and cfc applied that dollar_figure to the selected notes in a manner directly related to those notes’ outstanding balances cfc then treated each of those notes as satisfied on its books and erased records of those notes from its computer cfc also removed the ledger cards from its records and mr cordes added those records or had them added to his own filing system thereafter all of the borrowers’ payments on the paid off notes were paid or delivered ultimately to mr cordes mr cordes issued receipts to the borrowers ’ mr cordes accumulated the payments he received on those notes and used them to pay off a number of cfc’s remaining outstanding notes throughout and mr cordes paid off big_number of cfc’s notes in this fashion in each year the notes and the notes respectively at the time the notes were removed from cfc’s books they were worth dollar_figure in exchange for those notes mr cordes paid cfc dollar_figure and cfc deducted the balance dollar_figure as a bad_debt for respondent determined the difference between the notes’ values and the prices mr cordes paid for them constituted a constructive_dividend to cfc’s shareholder s some cfc employees assisted mr cordes in collecting the payments and issuing the receipts in many cases the borrowers were not aware that mr cordes now held those notes the parties stipulated that the difference between the value of the notes and the amount mr cordes transferred in exchange for the notes was dollar_figure the difference between the notes’ values and the prices mr cordes paid for them however is dollar_figure according to the values the parties continued -- at the time the notes were removed from cfc’s books they were worth dollar_figure in exchange for those notes mr cordes paid cfc dollar_figure and cfc deducted the balance dollar_figure as a bad_debt for respondent determined the difference between the notes’ values and the prices mr cordes paid for them constituted a constructive_dividend to cfc’s shareholder s in cfc executed a form cg-4549 income_tax examination changes in which it conceded that the bad_debt deductions it claimed in and with respect to the and notes described above were false fraudulent and not allowable the parties stipulated that the notes and the notes accumulated dollar_figure and dollar_figure respectively in interest from the dates mr cordes paid them off neither cfc nor mr cordes reported that interest_income on their returns for those years the cordeses did not provide their accountant mr continued assigned to those items we are unable to discover the source or rationale for this discrepancy but we nevertheless treat dollar_figure as the amount at issue in accordance with respondent’s determination and the parties’ stipulation ‘the parties stipulated that the difference between the value of the notes and the amount mr cordes transferred in exchange for the notes was dollar_figure the difference between the notes’ values and the prices mr cordes paid for them however is dollar_figure according to the values the parties assigned to those items we are unable to discover the source or rationale for this discrepancy but we nevertheless treat dollar_figure as the amount at issue in accordance with respondent’s determination and the parties’ stipulation - - hinman with complete and accurate information regarding the and notes in connection with the and notes cfc paid costs associated with repossessions of financed vehicles in the amounts of dollar_figure and dollar_figure in and respectively cfc deducted these payments on its and forms u s_corporation income_tax return respectively diversion of checks from bad_debt recoveries diversion of unbooked cfc income and unexplained source of funds the parties stipulated that the amounts respondent determined cfc distributed as diverted checks from bad_debt recoveries and as diverted unbooked cfc income constitute constructive dividends for to the extent of dollar_figure and dollar_figure respectively respondent concedes that portion of his determination in excess of the parties’ stipulation as set forth above respondent determined that cfc sold the and notes to mr cordes for prices below their fair_market_value respondent determined that the prices at which they were sold were dollar_figure and dollar_figure respectively but was unable to determine the source of all those funds used to purchase the notes at those prices respondent determined that the unexplained source of funds constituted a further constructive_dividend to cfc’s shareholder s after stipulations the parties agree that with respect to these items cfc’s shareholder s received constructive dividends in the amount of dollar_figure both in and in respondent - - concedes that portion of his determination in excess of the parties’ stipulation opinion i constructive dividends respondent determined that each of the individual petitioners before us had taxable_income from receipt of constructive dividends in and in amounts of dollar_figure and dollar_figure respectively see sec_61 respondent primarily argues that mr cordes is properly taxable for all of the constructive dividends rather than any of the other individual shareholders because respondent contends mr cordes was the beneficial_owner of all the cfc and eci stock during the years at issue ’ respondent alternatively argues that each individual petitioner is taxable on receipt of constructive dividends in amounts proportionate to his or her record ownership petitioners argue that although mr cordes completely controlled cfc and kci mr cordes cannot be held to have received constructive dividends because he did not hold stock in those corporations in the taxable years before us in response to respondent’s alternative argument petitioners argue that because mr cordes completely controlled cfc and eci and the record owners had no knowledge of did not authorize or did not ‘2respondent concedes that if we find mr cordes was the beneficial_owner of all the cfc and eci stock during the years at issue then the other individual petitioners are not liable for tax on receipt of constructive dividends for those years -- - actually benefit from the transactions they received no constructive dividends this is not the first time mr cordes and his family have appeared before us nor is it the first time that mr cordes and his family have presented us with a mishmash of arguments apparently designed to escape the consequences of the tax laws cordes v commissioner tcmemo_2002_124 cordes v commissioner tcmemo_1994_377 for the reasons discussed below we conclude that in the taxable years before us cfc and eci conferred certain economic benefits on mr cordes as beneficial_owner of all the stock in those corporations without expectation of repayment and that mr cordes has income from constructive dividends the law in this area is well settled sec_301 and c requires the inclusion in a shareholder’s gross_income of amounts received as dividends sec_61 sec_301 a 460_us_370 see 621_f2d_731 5th cir see also 279_us_716 sec_316 defines a dividend as any distribution_of_property made by a corporation to its shareholders--- out of its earnings_and_profits accumulated after date or out of its earnings_and_profits of the taxable_year ’ it is not necessary that the corporation 3petitioners have failed to prove that there was not sufficient accumulated or current_earnings_and_profits to support the deficiency determined in respondent’s notices of deficiency continued -- - intend a dividend or that the distribution be termed a dividend or recorded as such 605_f2d_1146 10th cir thus dividends may be either formally declared or they may be constructive ireland v united_states supra pincite a constructive_dividend is paid when a corporation confers an economic benefit on a shareholder without expectation of repayment 521_f2d_160 10th cir that shareholder for the taxable years before us is mr cordes although mrs cordes eddy ben cordes jean ann richard and john cordes in some proportion held legal_title to all of the outstanding shares of stock in cfc and eci throughout the taxable years at issue record ownership of stock standing alone is not determinative of who is required to include any dividends attributable to such stock in gross_income rather beneficial_ownership is the controlling factor cordes v commissioner tcmemo_1994_377 citing 544_f2d_419 continued rule a the internal_revenue_service restructuring reform act of publaw_105_206 sec 112_stat_685 added sec_7491 which is applicable to court proceedings arising in connection with examinations commencing after date under sec_7491 congress requires the burden_of_proof to be placed on the commissioner subject_to certain limitations where a taxpayer introduces credible_evidence with respect to factual issues relevant to ascertaining the taxpayer’s liability for tax in the instant case petitioners have not raised the application of this provision further the record does not indicate that the commissioner’s examinations commenced after date 9th cir revg tcmemo_1972_223 71_tc_346 affd without published opinion 652_f2d_65 9th cir cepeda v commissioner t c memo beneficial_ownership is marked by command over property or enjoyment of its economic benefits ’ cordes v commissioner tcmemo_1994_377 quoting cepeda v commissioner supra a taxpayer’s total control_over a corporation and use of corporate funds for personal reasons can result in constructive dividends even though the taxpayer did not hold legal_title to the corporation’s stock at the time of the advances 74_tc_1513 cordes v commissioner tcmemo_1994_377 in cordes v commissioner tcmemo_1994_377 and in cordes v commissioner tcmemo_2002_124 we held mr cordes received constructive dividends even though he did not hold legal_title to any shares because we found he exercised full control_over cfc in the taxable years there at issue in those cases mr cordes caused cfc to make distributions to him to friends and family and to his personal creditors he controlled the timing amount and uses of those funds because mr cordes had total control_over cfc and used the corporate funds for personal reasons we held that whether or not petitioner mr cordes was a stockholder of record petitioner had beneficial_ownership of all of the stock cordes v commissioner tcmemo_2002_124 cordes v commissioner tcmemo_1994_377 by virtue of his -- - beneficial_ownership we held he received constructive dividends and was required to include those dividends in his gross_income petitioners do not dispute mr cordes’s complete control_over all aspects of the corporations in the taxable years before us in fact petitioners rely on that control as the reason why the record owners should not be held to have received constructive dividends petitioners acknowledge that in the taxable years before us mr cordes exercised complete control_over cfc and eci and made all the decisions as to amounts timing and character of the distributions here at issue all decisions typically made by shareholders were instead made by mr cordes and the record owners knew that the parties concede that regardless of record ownership mr cordes had the power to change ownership of those shares as he wished petitioners even stated in their opening brief that the nominal owners are eddy ben cordes john j cordes and jean ann richard for the years and it is clear however that these persons own these corporations in form only the true control of these corporations is in edmund j cordes it is abundantly clear that mr cordes was cfc’s and eci’s beneficial_owner during the taxable years before us we must now consider whether eci and cfc conferred economic benefits on the petitioner-shareholder mr cordes as beneficial_owner without expectation of repayment see dolese v united_states supra pincite citing 565_f2d_1388 9th cir affg t c memo in order for a company-provided benefit to be treated as income to the shareholder the item must primarily benefit taxpayer’s personal interests as opposed to the business interests of the corporation ireland v united_states supra pincite accord dolese v united_states supra pincite petitioners bear the burden of proving that the amounts at issue were not expended for personal benefit or in discharge of personal obligations rule a 290_us_111 37_tc_650 arnold v commissioner tcmemo_1994_97 our standard in reviewing these many expenditures is whether the expense primarily benefited eci or cfc as appropriate or their sole shareholder mr cordes frazier v commissioner tcmemo_1994_358 affd 90_f3d_437 10th cir a constructive dividends from ebddie cordes inc diversion of checks from unidentified loans diversion of tag refunds and excess payoffs petitioners concede these items constitute constructive dividends for and petitioners’ only contention is that mr cordes did not receive income from these items because he was not a shareholder in eci we have already held that mr cordes was eci’s sole shareholder for federal_income_tax purposes and we now hold that petitioners’ concession operates to include these items in mr cordes’s income - - cash distributions to mr cordes eci distributed dollar_figure to mr cordes in petitioners contend that this amount does not represent constructive dividends but instead it represents loans or repayments of loans by eci to mr cordes petitioners have offered no evidence that any loans existed between eci and mr cordes without support petitioners assert that the multi-year history of large loans by and to mr cordes and these corporations over the years and the consistent history of repayment of the loans supports their position these statements are insufficient to show that the economic nature of the transactions themselves is that of a debt rather than of a constructive_dividend cordes v commissioner tcmemo_1994_377 citing 627_f2d_1032 10th cir affg tcmemo_1978_306 505_f2d_873 5th cir we cannot find that these payments represent loans or repayments of loans petitioners have failed to meet their burden_of_proof furthermore because petitioners have not shown that mr cordes did not benefit or that eci did benefit from these payments we conclude these payments are constructive dividends to eci’s beneficial_owner and sole shareholder for federal_income_tax purposes mr cordes --- - b constructive dividends from cfc cash distributions to john cordes and jean ann richard on date cfc made two checks payable one to john cordes the other to jean ann richard each in the amount of dollar_figure both checks bore the notation purchase stock and both checks were endorsed by mr cordes or someone acting on his behalf and redeposited in cfc’s bank account at mr cordes’s direction upon receipt of the checks cfc established accounts on its books evidencing a note payable to john cordes and another to jean ann richard each in the amount of dollar_figure throughout and cfc made a number of distributions to john cordes jean ann richard and mrs cordes and charged those distributions to john cordes’s and jean ann richard’s loan accounts a the two dollar_figure distributions respondent’s primary arguments with respect to the two dollar_figure distributions are cfc distributed dollar_figure for mr cordes’s use in purchasing stock from john cordes and the distribution thereby constitutes a constructive_dividend to cfc’s shareholder s and cfc distributed dollar_figure to jean ann ‘respondent also argued that john cordes received the dollar_figure as proceeds from the sale of a capital_asset but respondent did not amend his answer to include the tax on such proceeds respondent further argued that john cordes lent the dollar_figure to cfc upon his receipt of the funds and that cfc made payments to john cordes on that loan in and as these arguments have no bearing on whether the items in the notice_of_deficiency constitute constructive dividends to cfc’s shareholder s we do not examine these arguments -- - richard and the distribution thereby constitutes a constructive_dividend to cfc’s shareholder s petitioners contend that john cordes and jean ann richard never received the two dollar_figure checks or the funds the checks represented and cfc’s shareholder s therefore cannot be held to have received constructive dividends petitioners argue that the two dollar_figure checks were drafted merely to establish interest-- free lines of credit through cfc to john cordes and jean ann richard and that only amounts charged to those lines of credit and actually received by john cordes or jean ann richard may be constructive dividends petitioners’ argument that cfc did not confer a benefit on john cordes and jean ann richard begs the question of who was the beneficial_owner of the stock nominally owned by john cordes and ‘regarding the distribution to jean ann richard respondent asserts that the distribution alternatively may be characterized as a sale of stock in edmund cordes inc by jean ann richard to cfc in exchange for a dollar_figure which she constructively received in or b dollar_figure paid_by installment of which she received dollar_figure in and dollar_figure in ‘upon careful review of the facts in this case and our prior opinions involving mr cordes and the cordes corporations we find that mr cordes was beneficial_owner of all the corporations discussed herein including those corporations in which respondent contends mr cordes purchased stock the facts do not establish that mr cordes used a dollar_figure check to purchase stock from john cordes or that cfc used dollar_figure to purchase stock from jean ann richard the facts do show that on date mr cordes and cfc became the respective record owners of the shares in question but mr cordes’s complete control_over the corporations allowed him to alter record ownership in any or all of the corporations at any time without consideration - - jean ann richard cfc conferred economic benefits on its shareholder mr cordes by and upon delivering to him the two dollar_figure checks on date without expectation of repayment cfc provided these funds to mr cordes for personal reasons and it is inconsequential that mr cordes subsequently deposited the funds into cfc’s bank account for his family’s benefit rather than directly into his children’s personal accounts what mr cordes ultimately did with the funds is not relevant cfc conferred upon mr cordes the economic benefit of control_over dollar_figure for personal reasons because cfc conferred upon mr cordes the ability to dispose_of dollar_figure for any personal reason and received no corporate benefit and did not expect any repayment we hold that mr cordes received constructive dividends in in the aggregate amount of dollar_figure b subsequent distributions from john cordes’s and jean ann richard’s loan accounts in distributions were made from john cordes’s loan account to john cordes in the amount of dollar_figure and from jean ann richard’s loan account to jean ann richard in the amount of dollar_figure in payments were made from john cordes’s loan account to john cordes in the amount of dollar_figure and to mrs cordes in the amount of dollar_figure and from jean ann richard’s loan account to jean ann richard in the amount of dollar_figure and to mrs cordes in the amount of dollar_figure respondent determined that the distributions to mrs cordes in and and the -- - distributions to jean ann richard in constitute constructive dividends to cfc’s shareholder s for some reason respondent did not make a similar determination with respect to the distributions to john cordes in and or with respect to the distributions to jean ann richard in ’ respondent’s positions are inconsistent and respondent’s arguments are confusing incomplete and unsupported at best in light of our holding we see no need to address them fully the distributions to john cordes jean ann richard and mrs cordes were charged to john cordes’s and jean ann richard’s loan accounts those loan accounts were established to account for the dollar_figure that was distributed in effect to mr cordes and returned to cfc until mr cordes determined what to do with the funds the loan accounts operated in substance as savings accounts from which mr cordes distributed funds to his family members at will because we have already held that mr cordes must report the dollar_figure recorded in the loan accounts as constructive dividends we hold that the distributions from the loan accounts ie the distributions of dollar_figure and dollar_figure to ‘trespondent instead argued that the distributions to john cordes establish that a bona_fide debt existed between cfc and john cordes but respondent did not determine that a portion of those distributions constituted interest_income or if respondent agreed with petitioners that these distributions were interest-- free loans from cfc to john cordes that the forgone_interest constituted a constructive_dividend to cfc’s shareholder s respondent has not made an argument with regard to the distributions to jean ann richard totaling dollar_figure other than to mention that they may constitute constructive dividends or the proceeds of an installment_sale to jean ann richard - - john cordes in and respectively the distributions of dollar_figure and dollar_figure to jean ann richard in and respectively and the distributions of dollar_figure and dollar_figure to mrs cordes in from john cordes’s and jean ann richard’s accounts respectively do not constitute additional constructive dividends from cfc to mr cordes cash distributions to mrs cordes cfc issued checks totaling dollar_figure in and totaling dollar_figure in made payable to mrs cordes all of the checks were deposited in mrs cordes’s personal checking account respondent determined that all of these distributions constituted constructive dividends to cfc’s shareholder s petitioners maintain that the distributions are not constructive dividends to cfc’s shareholder s because the shareholder s did not authorize receive or derive economic benefits from the distributions or alternatively that the distributions represented loans or the repayment of loans to the shareholder s respondent also determined that the dollar_figure and dollar_figure distributions mrs cordes received and deposited in and which were charged to john cordes’s and jean ann richard’s loan accounts respectively were constructive dividends to cfc’s shareholder s we addressed those distributions above below ‘8respondent has not alleged that these distributions are taxable to any of the petitioners on any other grounds nor has respondent alleged that the distributions are gifts from mr cordes to the respective recipients - - we address the dollar_figure and the dollar_figure mrs cordes received in and respectively and which have not already been considered a interest in each of and cfc deducted dollar_figure of the distributed funds as interest_expenses and mrs cordes included that dollar_figure in income as interest received respondent determined that cfc and mrs cordes improperly treated the funds as interest because cfc was not indebted to mrs cordes in or respondent therefore disallowed cfc’s deductions and decreased mrs cordes’s income petitioners contend the uncontroverted testimony here is that dollar_figure was advanced to cordes finance corp by edmund j cordes in the money was advanced and the dollar_figure payments annually do constitute a reasonable rate of interest approximately on these funds petitioners have confused the facts we have found the dollar_figure was transferred by mr cordes to cfc in exchange for some of the notes mrs cordes did not transfer those funds nor did the transfer of dollar_figure constitute a loan petitioners have failed to demonstrate that cfc was indebted in any way to mrs cordes we note that although mr cordes testified that cfc repaid total loans of approximately dollar_figure to mrs cordes’s account between and petitioners have not presented any corroborative evidence that such loans existed mr cordes also testified that some of the funds mrs cordes received in may have been repayments of loans she made to john cordes mr cordes’s testimony is inconsistent and not continued -- p7 - and we must therefore hold that the two dollar_figure distributions to mrs cordes do not constitute deductible_interest expenses to cfc or interest_income to mrs cordes b loans and repayment of loans respondent determined that the amounts mrs cordes received and deposited which we have not yet addressed dollar_figure in and dollar_figure in constitute constructive dividends to cfc’s shareholder s petitioners posit a theory that these distributions are either loans from cfc to mrs cordes or repayment of loans by cfc to mrs cordes petitioners rely on their alleged history of loans together with cfc’s treatment of these distributions petitioners did not introduce any evidence that these distributions were loan related petitioners failed to show that cfc benefited from these distributions or that mr cordes did not so benefit distributions to family members can constitute constructive dividends to the shareholder s when the distributions fail to benefit the corporation cordes v commissioner tcmemo_1994_377 in situation nearly identical to that before us this court held cfc’s transfers to friends wife and children of mr cordes to be constructive dividends to him when he failed to show corporate benefit or expectation of repayment proctor v commissioner tcmemo_1981_436 payments to shareholder’s mother in excess of compensation reasonable for services continued credible - - provided constituted constructive_dividend income to shareholder because petitioners failed to show mr cordes received no personal benefit from these transfers we hold mr cordes received constructive dividends in and with respect to these items bargain sale of notes respondent determined that cfc sold notes to mr cordes in each of and at prices below their fair_market_value and that the discount at which cfc sold the notes constitutes constructive dividends from cfc to cfc’s shareholder s petitioners contend cfc owned the and notes at all times and that because mr cordes did not purchase the and notes in a bargain sale or otherwise cfc conferred no economic benefit on its shareholder s we conclude below that mr cordes did in fact purchase the and notes at prices below fair_market_value and that mr cordes as beneficial_owner of cfc received constructive dividends in amounts equal to the discounts received in mr cordes transferred dollar_figure of his personal savings to cfc contemporaneously cfc removed a number of notes from its books and mr cordes recorded those notes on his books mr cordes contends that his transfer of dollar_figure to cfc was merely coincident with cfc’s reorganization of its records mr cordes however offered no evidence that the dollar_figure was treated as a capital_contribution or loan to cfc rather than as funds used to purchase the notes - - mr cordes later collected payments of principal and interest on those notes and transferred those payments to cfc in exchange for additional notes petitioners have failed to offer any evidence that those subsequent transfers to cfc were other than funds used to purchase notes petitioners contend instead that cfc owned the notes because the borrowers were never told to make payments to mr cordes the ledger cards were merely moved across the room payments were still made payable to cfc and those payments were ultimately deposited in cfc’s account we reject petitioners’ contentions for several reasons the borrowers’ beliefs regarding the identity of the lender and the retention of the ledger cards in the same room are of comparatively little relevance in these circumstances what is more relevant is that cfc treated the notes as satisfied and completely removed the records from its computer and files going so far as to claim deductions for bad_debts and mr cordes added the records to his files and treated them as outstanding debts owed to him moreover any payments delivered to cfc were promptly forwarded to mr cordes although cfc’s employees occasionally collected the payments from the borrowers recorded them in mr cordes’s records and issued receipts for those payments they did so on behalf of mr cordes we also reject petitioners’ allegation that mr cordes merely held the payments in escrow ultimately delivering them to cfc we presume petitioners’ argument is that because mr cordes never deposited the payments in his own account he did -- - not have dominion or control_over the funds and the funds therefore are not income to him however mr cordes received payments on notes he had already purchased from cfc and exchanged them for more of cfc’s notes which he then also owned that mr cordes did not first deposit the payments received in a personal account before purchasing additional notes is irrelevant we find that mr cordes had full control_over the payments and that he owned the notes in question clearly mr cordes purchased big_number notes from cfc in and petitioners have disputed only who owned the and notes and have not addressed whether cfc sold the notes to mr cordes for prices below fair_market_value should we conclude as we have that mr cordes owned the notes sec_1_301-1 income_tax regs states that if property is transferred by a corporation to a shareholder which is not a corporation for an amount less than its fair_market_value ina sale_or_exchange such shareholder shall be treated as having received a distribution to which sec_301 applies because cfc sold the and notes to mr cordes for prices below fair_market_value we hold that the differences between the prices paid for the notes and the fair market values of the notes are constructive dividends to mr cordes see 99_tc_561 hugene d lanier inc v commissioner tcmemo_1998_7 citing sec_1_301-1 income_tax regs 302_us_63 --- - diversion of checks from bad_debt recoveries and diversion of unbooked cfc income the parties agree that these items constitute constructive dividends for in the amounts of dollar_figure and dollar_figure respectively petitioners’ only contention is that mr cordes did not receive income from these items because he was not a shareholder in cfc we have already held that mr cordes was cfc’s sole shareholder for federal_income_tax purposes and we now hold that petitioners’ concessions operate to include these items in mr cordes’s income unexplained source of funds in connection with respondent’s determination that mr cordes purchased the and notes at prices below fair_market_value respondent further determined that cfc provided some of the funds for those purchases or further discounted the purchases that is although the parties stipulated that cfc sold the notes to mr cordes for dollar_figure only dollar_figure could be traced to funds supplied by mr cordes respondent determined that the difference dollar_figure was a further constructive_dividend from cfc to its shareholder s likewise the parties stipulated that cfc sold the notes to mr cordes for dollar_figure but that only dollar_figure could be traced to funds supplied by mr cordes respondent determined that the difference dollar_figure was a further constructive_dividend from cfc to its shareholder s the parties later stipulated that of those amounts only dollar_figure constitutes a constructive_dividend - - for each of and and respondent concedes that the amounts in excess of those stipulations are not constructive dividends the only issue with regard to these items is who received these constructive dividends because mr cordes was cfc’s sole shareholder for federal_income_tax purposes we hold mr cordes must include constructive dividends of dollar_figure in income for each of his and taxable years il the proper tax treatment of interest earned on the and notes in our discussion above regarding the and notes we found that mr cordes purchased notes from cfc in each of and respondent determined that mr cordes earned interest on the notes purchased’ and that mr cordes earned that interest in connection with his trade_or_business presumably the trade_or_business of financing but respondent has not specifically named that trade_or_business and is liable for tax on the net_earnings_from_self-employment the parties stipulated that interest in the amounts of dollar_figure and dollar_figure was earned on the notes in and respectively petitioners concede that neither cfc nor mr cordes reported any of that interest as income and that the owner of the notes either cfc or mr cordes must report that income petitioners respondent alternatively determined that if we find mr cordes did not purchase the notes ie that cfc still owned the notes then cfc must report that interest as income in and - - contend cfc owned the notes at all times and cfc concedes the interest is includable in its income because we have held that mr cordes owned the and notes mr cordes must include in income the interest on those notes in accordance with his concessions and sec_61 mr cordes has not addressed respondent’s contention that if mr cordes owned the notes he is liable for self-employment_tax on the interest by virtue of his failure to address the self- employment_tax issue mr cordes is liable for self-employment_tax on that income see also sec_1_1402_a_-5 income_tax regs for specific inclusion iii repossession costs deduction cfc deducted costs incurred and paid in connection with repossessing certain vehicles in and including the costs associated with repossessing vehicles which secured the and notes the parties stipulated that cfc incurred paid and deducted costs of dollar_figure in and dollar_figure in in the extent of mr cordes’s argument regarding self- employment_tax is as follows xi edmund j cordes is not liable for self-employment_tax for the taxable years and petitioner contends the omitted interest_income relating to the discounted notes is income to cordes finance corp not to petitioner any other income as a result of constructive dividends would not be subject_to self employment_taxes sec_1401 imposes a tax only on the self employment income of an individual and edmund j cordes had no self employment income in or - -- connection with repossessing vehicles that secured the and notes respondent determined that cfc improperly deducted the costs under sec_162 because cfc did not incur or pay the costs in connection with its trade_or_business petitioners contend that cfc owned the notes and that cfc paid and properly deducted the costs in connection with its trade_or_business sec_162 provides for a deduction from income of all ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business sec_1 l a income_tax regs provides that the expenses deductible from income include those pertaining to the taxpayer’s trade_or_business in the instant cases we have held mr cordes not cfc owned the notes associated with these costs it follows that cfc did not incur or pay these costs in connection with its own trade_or_business but in connection with an activity carried on by mr cordes petitioners have cited no authority allowing one party cfc a deduction for costs paid in connection with another party’s mr cordes’s trade_or_business or other activity we hold therefore cfc may not deduct those costs under sec_162 -petitioner contends that if cfc may not deduct the costs then we must allow mr cordes to deduct them this issue was not formally raised by either party but both parties have addressed it and we treat it as tried by consent because mr cordes is a cash_method taxpayer he can deduct the costs in the year in which he pays them sec_461 476_us_593 because mr cordes did not pay the costs in or he may not deduct the costs in those taxable years -- - iv accuracy-related_penalties respondent determined that each petitioner is liable for an accuracy-related_penalty for each of the taxable years before us with respect to eci docket no is the only year in which the penalty is still at issue we consider the and taxable years with respect to all the other petitioners a eci the cordeses’ children cfc and the accuracy- related penalty due to a substantial_understatement_of_income_tax respondent determined that all petitioners save the cordeses are liable for the accuracy-related_penalty due toa substantial_understatement_of_income_tax pursuant to sec_6662 a and b a substantial_understatement is an understatement of income_tax for any taxable_year which exceeds the greater of a percent of the tax required to be shown on the return or b dollar_figure in the case of an individual or dollar_figure in the case of a corporation sec_6662 as this threshold computation is dependent on our other earlier conclusions we leave for the rule computation whether there was a substantial_understatement and whether and to what extent an accuracy-related 23tn docket no respondent did not determine petitioner eddie cordes inc successor by merger with cordes finance corp was liable for the accuracy-related_penalty pursuant to sec_6662 for respondent so determined because the items which were not attributable to fraud did not give rise on their own to a deficiency to which an accuracy- related penalty could attach respondent did determine however that should we find petitioner not liable for the fraud_penalty pursuant to sec_6663 petitioner is liable for the accuracy- related penalty pursuant to sec_6662 - - penalty is properly imposed for each of the taxable years at issue in these dockets petitioners contend that they are not liable for the substantial_understatement_penalty because they did not substantially understate their income_tax liabilities eci separately alleges that the underpayment_of_tax after all agreed adjustments is less than dollar_figure emphasis added rather than point out all of petitioner’s errors in making this statement we defer to the rule computation for resolution of eci’s liability the cordes children and cfc claim that they did not understate their income_tax and alternatively they relied on their financial adviser return preparer for correct and proper tax_return preparation and that such reliance absolves them of liability for the penalty as to their first argument to the extent the rule computation discloses a substantial_understatement as defined in sec_6662 petitioners’ primary argument fails if the rule computation discloses no substantial_understatement then no accuracy-related_penalty is proper as to that petitioner for that taxable_year 4we have found that the cordes children did not receive constructive dividends and it appears that the rule computation will demonstrate that they did not substantially understate their respective income_tax liabilities we nevertheless address the accuracy-related_penalties as they relate to these petitioners in the unlikely event that the rule computation does demonstrate a substantial_understatement -- - as to petitioners’ second argument sec_6664 c provides a defense against the accuracy-related_penalty with respect to any portion of an underpayment if the taxpayer shows that there was reasonable_cause for such portion and that the taxpayer acted in good_faith with respect to such portion reliance on professionals may satisfy the reasonable_cause and good_faith elements of sec_6664 if taxpayers show by a preponderance_of_the_evidence that the professional was a competent professional who had sufficient expertise to justify reliance the taxpayer gave the adviser all necessary and accurate information and the taxpayer actually relied in good_faith on the adviser’s judgment 115_tc_43 based on all the pertinent facts and circumstances sec_1_6664-4 b income_tax regs we find petitioners have failed to establish that there was reasonable_cause for any portion of the understatements in these cases or that they acted with any measure of good_faith sec_6664 among other reasons john cordes eddy ben cordes and cfc have not established that they provided robert hinman their financial adviser return preparer with all the necessary and accurate information or that mr hinman advised them on any reporting positions petitioners seemed to rely on mr hinman if at all solely because he was a certified_public_accountant known and recommended by mr cordes john cordes testified that i don’t really recall what specifically was on the tax_return what robert -- - hinman sent me i--my wife and i signed and returned it he’s a cpa and i figured he knew how to handle that situation referring to dollar_figure reported on his return as interest for which he could not recollect the source jean ann richard has also failed to prove she reasonably relied on her return preparer jean ann richard’s returns for and were not prepared by mr hinman the record contains no information regarding mr mayhall the individual who prepared her returns mr mayhall’s competency or expertise what information jean ann richard provided to him or whether he issued any advice upon which jean ann richard relied we hold petitioners are liable for the accuracy-related_penalty due to substantial_understatement_of_income_tax pursuant to sec_6662 and b to the extent the rule computation shows an underpayment_of_tax b the cordeses and the accuracy-related_penalty due to negligence or disregard of rules or regulations respondent determined in docket no that the cordeses were liable for the accuracy-related_penalty due to negligence or disregard of rules or regulations pursuant to sec_6662 and b negligence is defined as any failure to make a reasonable attempt to comply with the provisions of the internal_revenue_code sec_6662 85_tc_934 negligence is lack of due care or failure to do what a reasonable and prudent person would do under the -- -- circumstances the term disregard includes any careless reckless or intentional disregard sec_6662 disregard of rules or regulations is careless if the taxpayer does not exercise reasonable diligence to determine the correctness of a return position that is contrary to the rule_or_regulation sec_1_6662-3 income_tax regs disregard of rules or regulations is reckless if the taxpayer makes little or no effort to determine whether a rule_or_regulation exists id disregard of rules or regulations is intentional if the taxpayer knows of the rule_or_regulation that is disregarded id petitioners have the burden of proving that respondent’s determination is erroneous and that they did what reasonably prudent people would have done under the circumstances rule a 58_tc_757 petitioners’ sole defenses to respondent’s determination are that they did not underpay their tax and alternatively they acted with reasonable_cause and in good_faith with respect to the underpayment we must sustain respondent’s determination we have already decided whether the cordeses underpaid their taxes for the taxable years before us to the extent the rule computation discloses an underpayment as defined in sec_6664 the cordeses’ argument fails in addition the evidence does not demonstrate that the cordeses relied on robert hinman ’ the cordeses also purportedly relied on revenue_agent ken mcgee’s advice we reject their claim because it is not credible -- - or that their purported reliance on mr hinman was in good_faith or reasonable the cordeses did not show they requested or received advice regarding these transactions and any advice regarding those transactions that were discussed was based on incomplete and inaccurate information information withheld by mr cordes the facts before us simply do not establish that the reasonable_cause exception in sec_6664 applies therefore the cordeses are liable for the accuracy-related_penalty due to negligence or disregard of rules or regulations for the taxable years before us to the extent the rule computation shows an underpayment_of_tax vv the fraud_penalty respondent determined that cfc and mr cordes are liable for the fraud_penalty for their and taxable years sec_6663 provides if any part of any underpayment_of_tax required to be shown on a return is due to fraud there shall be added to the tax an amount equal to percent of the portion of the underpayment which is attributable to fraud sec_6663 provides that if any portion of an underpayment is attributable to fraud then the entire underpayment shall be treated as attributable to fraud unless the taxpayer shows by a preponderance_of_the_evidence that a portion was not so attributable respondent has the burden of proving fraud by clear_and_convincing evidence sec_7454 rule b a cordes finance corp in respondent and cfc executed a partial agreement form cg-4549 wherein cfc conceded it underpaid taxes in the amount of dollar_figure for and that dollar_figure of that underpayment was attributable to fraud respondent later issued a notice_of_deficiency to cfc in which respondent determined cfc underpaid taxes for in the amount of dollar_figure dollar_figure as agreed dollar_figure in additional deficiencies and that the entire underpayment was attributable to fraud consequently respondent determined cfc’s fraud_penalty for was dollar_figure more than the parties had previously agreed ’ cfc disputes this increased fraud_penalty ’ respondent’s determinations are typically entitled toa presumption of correctness when respondent alleges fraud however respondent must prove by clear_and_convincing evidence - cfc conceded an underpayment of taxes of dollar_figure for based on adjustments to cfc’s bad_debt expenses bad_debts charged to income and interest_expenses to john cordes inc 7respondent argued in his opening brief that the only issue with regard to cfc’s liability for fraud is the computation of the fraud penalties under the ordering rules of sec_1_6664-3 income_tax regs petitioner however does not appear to dispute respondent’s calculation of the fraud penalties petitioner disputes only the underlying deficiencies 8the parties’ partial agreement also included a concession by cfc to an underpayment and a fraud_penalty for cfc’s taxable_year respondent later determined in his notice_of_deficiency that the fraud_penalty for was less than the parties had previously agreed and cfc has not disputed that determination we therefore need not address the fraud issue with respect to cfc’s taxable_year - that there is an underpayment and at least some of the underpayment is attributable to fraud 27_tc_561 affd 252_f2d_681 6th cir if he carries this burden by clear_and_convincing evidence the correctness of the deficiencies determined by him will again be presumed id this burden does not require respondent to prove each item comprising the underpayment set forth in the notice_of_deficiency nor does it require respondent to prove all of the underpayment is attributable to fraud sec_6663 see also shaw v commissioner supra pincite bencivenga v commissioner tcmemo_1989_239 cfc’s concession of a dollar_figure underpayment of which dollar_figure is attributable to fraud satisfies respondent’s burden of proving that some part of cfc’s underpayment is due to fraud console v commissioner tcmemo_2001_232 underpayment attributable to fraud deemed stipulated under rule f for failure to prosecute can satisfy both elements of respondent’s burden_of_proof wagner v commissioner tcmemo_1996_355 stipulation to underpayment satisfies that element of respondent’s burden_of_proof barlow v commissioner tcmemo_1994_11 stipulation to underpayment satisfies that element of respondent’s burden_of_proof and stipulation to fraud acknowledged by court but decided on other grounds see also 91_tc_1 conseguently a part of cfc’s underpayment is due to fraud sec_6663 unless cfc establishes that a portion of the underpayment is not - - due to fraud we must treat the entire underpayment as attributable to fraud sec_6663 cfc has the burden of showing by a preponderance_of_the_evidence that any of respondent’s determinations are erroneous or that any portion of the underpayment was not attributable to fraud cfc has failed to meet that burden on all counts we therefore must hold that the entire underpayment dollar_figure is attributable to fraud sec_6663 b edmund j cordes respondent determined that the portions of mr cordes’s and underpayments attributable to fraud are those portions representing the unreported constructive_dividend and interest_income resulting from mr cordes’s bargain_purchase of cfc’s notes again the burden_of_proof is on respondent respondent has clearly and convincingly shown that mr cordes has unreported constructive dividends and interest_income giving rise to - cfc’s only argument that a portion of the underpayment is not so attributable to fraud was the taxpayer not only relied on the advice of his c p a but also on the advice of the internal_revenue_service agent ken mcgee record cites omitted while reliance on professionals can be a defense to fraud cfc could prevail with this defense only if it showed it provided the professional with complete and accurate information 781_f2d_1566 11th cir quoting 301_f2d_484 5th cir affg t c memo affg tcmemo_1985_63 the facts with which we were presented indicate just the opposite cfc did not turn to professionals for any advice let alone provide them with complete and accurate information the only occasion when cfc through mr cordes obtained advice from a professional was when mr cordes inguired about the deductibility of losses upon the sale of cfc’s notes cfc has conceded those deductions were fraudulently taken - underpayments in and the only remaining issue is whether mr cordes intended to evade the taxes on these items known to be owing by conduct intended to conceal mislead or otherwise prevent collection_of_taxes 398_f2d_1002 3d cir 80_tc_1111 the issue is one of fact to be determined upon a consideration of the entire record rowlee v commissioner supra pincite 55_tc_85 for the reasons discussed below we hold for respondent fraudulent intent can seldom be established by direct proof of the taxpayer’s intention therefore fraud is usually established by drawing inferences from the taxpayer’s entire course of conduct 94_tc_654 56_tc_297 the courts have developed several indicia or badges of fraudulent behavior circumstantial evidence which may give rise to a finding of fraudulent intent includes understatement of income inadequate records failure_to_file tax returns implausible or inconsistent explanations of behavior concealment of assets failure to cooperate with tax authorities filing false documents failure to make estimated_tax payments dealing in cash engaging in illegal activity and attempting to conceal illegal activity 796_f2d_303 9th cir affg tcmemo_1984_601 102_tc_632 these badges_of_fraud are nonexclusive 94_tc_316 the taxpayer’s background and the context of the events in question may be considered as circumstantial evidence of fraud 465_f2d_299 7th cir citing 19_bta_518 affg tcmemo_1970_274 respondent has clearly and convincingly shown that mr cordes intended to evade tax known to be owing by concealing misleading and otherwise preventing the collection_of_taxes and mr cordes is therefore liable for the fraud_penalty for and we rely on the following facts in reaching our conclusion respondent demonstrated that mr cordes consistently over a period of several years substantially understated his income by not reporting the constructive dividends or interest_income earned clayton v commissioner supra pincite see also steines v commissioner tcmemo_1995_261 while this consistent underreporting alone is not enough to establish fraud other badges_of_fraud are present here that make it clear mr cordes’s behavior was fraudulent mr cordes repeatedly failed to cooperate with tax authorities regarding mr cordes’s taxable_year the revenue_agent assigned to the case ken mcgee requested from mr cordes and cfc which mr cordes controlled documents such as the loan ledger cards which relate to the constructive dividends and the interest_income mr cordes refused to provide the -- - revenue_agent with cfc’s books_or_records refused to comply with a subsequent summons for the same books_and_records and only complied with a second-chance letter to provide those documents approximately months after the initial summons the revenue_agent issued two additional document reguests after reviewing the initial documents but mr cordes specifically refused to provide any additional information the revenue_agent then issued a summons for those documents as well as a summons for the books_and_records containing information regarding mr cordes’s taxable_year those summonses were issued to eddy ben cordes president of cfc as well as to bill burns viola burns and michael heinz other administrative personnel the revenue_agent also issued a summons to mr cordes to produce his personal ledger cards mr cordes denied he had those cards and refused to comply with the summons although mr burns and mrs burns had informed the revenue_agent that mr cordes did keep those cards eventually mr cordes produced ledger cards in partial compliance with a judge’s order the revenue_agent was later able to obtain more ledger cards from mr cordes but cumulatively obtained cards pertaining to fewer than of the big_number notes mr cordes had purchased from cfc mr cordes’s repeated refusals to cooperate with the revenue_agent and his concealment of documents strongly indicate that mr cordes’s behavior was fraudulent mr cordes provided false documents to the revenue_agent mr cordes in an effort to prove there were no personal a7 - ledger cards in excess of those already produced provided the revenue_agent with documents that purported to show that the transferred notes were properly removed from cfc’s books and were not personally owned by mr cordes those documents consisted of purported lien releases each dated to coincide with the date the note was removed from cfc’s records the oklahoma tax commission’s records however evidenced that the liens were actually released on later dates indicating that those notes were outstanding beyond the date cfc removed them from its records mr cordes did not deny that the oklahoma tax commission’s records were accurate it appears mr cordes or someone acting on mr cordes’s behalf falsified many of those records intending to deceive the revenue_agent with the goal of evading taxes known to be owed this is yet another strong indication of fraud like cfc mr cordes’s sole defense to respondent’s assertion of the fraud_penalty was that he reasonably relied in good_faith on his accountant and the revenue_agent the facts pertaining to mr cordes’s reliance are identical to those we examined with regard to cfc the facts presented do not allow us to find mr cordes reasonably relied on professional advice in good_faith mr cordes did not show that he ever requested received or relied on any advice with regard to the transactions at issue considering all the facts and circumstances we hold respondent has clearly and convincingly proven a portion of mr -- - cordes’s underpayment is attributable to fraud and we conclude mr cordes is liable for the fraud_penalty for and we have considered the other arguments of the parties and to the extent not discussed herein we conclude that the arguments are irrelevant moot or meritless to reflect the foregoing decisions will be entered under rule i --- - appendix summary of conceded deemed conceded computational and settled issues the following is a summary of issues and or adjustments conceded deemed conceded of a computational nature or settled docket no eddie cordes inc a respondent disallowed petitioner’s deduction for a net_operating_loss_carryback of dollar_figure from in accordance with certain of respondent’s concessions for the taxable_year and for purposes of the rule computation respondent concedes petitioner incurred a net_operating_loss in in the amount of dollar_figure and that it may be properly carried back to respondent determined petitioner was liable for an accuracy-related_penalty pursuant to sec_6662 respondent concedes that determination respondent increased petitioner’s taxable_income by dollar_figure to account for overstated costs of goods sold petitioner concedes this adjustment respondent concedes that petitioner’s taxable_income should be decreased by dollar_figure pursuant to sec_263a to reflect additional costs of goods sold respondent increased petitioner’s taxable_income by dollar_figure to account for receipt of certain payments from mr cordes respondent made an identical adjustment in docket no in order to protect the government’s interest respondent concedes this adjustment in docket no respondent concedes petitioner may be entitled to deduct a larger amount for charitable_contributions for the taxable_year as and to the extent shown in the rule computation respondent increased petitioner’s taxable_income by dollar_figure to account for overstated costs of goods sold petitioner concedes this adjustment respondent concedes that petitioner’s taxable_income should be decreased by dollar_figure pursuant to sec_263a to reflect additional costs of goods sold respondent increased petitioner’s taxable_income by dollar_figure to account for receipt of certain payments from mr cordes respondent made an il docket no a -- - identical adjustment in docket no in order to protect the government’s interest respondent concedes this adjustment in docket no respondent concedes petitioner may be entitled to deduct a larger amount for charitable_contributions for the taxable_year as and to the extent shown in the rule computation respondent’s adjustments computationally eliminated petitioner’s net_operating_loss for in accordance with certain of respondent’s concessions and for purposes of the rule computation respondent concedes petitioner incurred a net_operating_loss for in an amount at least equal to dollar_figure and that it may be carried back to petitioner’s taxable_year respondent determined petitioner was liable for an accuracy-related_penalty pursuant to sec_6662 respondent concedes that determination joseph p and jean ann richard the parties previously agreed to increase and decrease taxable_income to account for a schedule a expense schedule c expenses and depreciation schedule e income and expenses and the self- employment_tax and the self-employment_tax deduction respondent made various computational changes to petitioners’ taxable_income so that the limitation of itemized_deductions was increased itemized_deductions were eliminated the standard_deduction was allowed and the exemption_amount under sec_151 was reduced the extent to which these changes affect petitioners’ ultimate liability will be calculated in the rule computation the parties previously agreed to increase and decrease taxable_income to account for a schedule a expense schedule c expenses and depreciation schedule e income and expenses and the self- employment_tax and the self-employment_tax deduction respondent made various computational changes to petitioners’ taxable_income so that the limitation of itemized_deductions was increased itemized_deductions were eliminated the standard_deduction was allowed and the exemption_amount under sec_151 was reduced the extent to which these changes affect petitioners’ ultimate liability will be calculated in the rule computation respondent increased petitioners’ taxable_income iil -- - by dollar_figure for wage expense under sec_45a furthermore respondent allowed a credit against petitioners’ tax in the amount of dollar_figure for the indian_employment_credit petitioners had requested this credit in a claim for a refund submitted to respondent respondent did not allow any other portion of the claimed refund petitioner did not address these amounts at trial or on brief and we deem petitioners to have conceded these adjustments docket no eddie cordes inc successor by merger with cordes finance corp a the parties previously agreed to increase taxable_income for bad_debt expenses and bad_debts charged to income the parties also previously agreed to decrease taxable_income to reflect an interest_expense payment made to john cordes inc respondent increased petitioner’s taxable_income by dollar_figure to reflect additional gross_receipts described in the notice_of_deficiency as gross_receipts - debit to income respondent concedes this adjustment respondent increased petitioner’s taxable_income by dollar_figure to reflect additional gross_receipts described in the notice_of_deficiency as gross_receipts -- credits to retained earnings the parties stipulated instead to increase taxable_income by dollar_figure petitioner concedes respondent’s determination increasing taxable_income by dollar_figure to reflect bad_debt recoveries respondent increased petitioner’s taxable_income by dollar_figure to reflect income from misposted receipts the parties stipulated instead to increase taxable_income by dollar_figure petitioner concedes respondent’s determination increasing taxable_income by dollar_figure to reflect income from unbooked receipts petitioner concedes respondent’s determination increasing taxable_income by dollar_figure to reflect payments on unidentified loans respondent increased petitioner’s taxable_income by dollar_figure to reflect income from unidentified sources the parties stipulated instead to increase taxable_income by dollar_figure the parties previously agreed to increase taxable_income for bad_debt expenses bad_debts charged to income and due to a disallowed net_operating_loss_carryover from the parties also previously iv docket no - - agreed to decrease taxable_income to reflect an interest_expense payment made to john cordes inc respondent increased petitioner’s taxable_income by dollar_figure to reflect income from misposted receipts the parties stipulated instead to increase taxable_income by dollar_figure petitioner concedes respondent’s determination increasing taxable_income by dollar_figure to reflect payments on unidentified loans respondent increased petitioner’s taxable_income by dollar_figure to reflect income from unidentified sources the parties stipulated instead to increase taxable_income by dollar_figure respondent increased petitioner’s taxable_income by dollar_figure to reflect an overstatement to legal and professional fees the parties stipulated instead to increase taxable_income by dollar_figure edmund j and june j cordes a the parties stipulated that for the following distributions constitute constructive dividends from eci dollar_figure from diversion of checks from unidentified loans dollar_figure from diversion of tag refunds and dollar_figure from excess payoffs the parties stipulated that for the following distributions constitute constructive dividends from cfc dollar_figure from diversion of checks from bad_debt recoveries dollar_figure from diversion of unbooked cfc income and dollar_figure from an unexplained source of funds respondent concedes that portion of his determination in excess of the parties’ stipulation petitioners concede receiving dollar_figure in social_security_benefits in the extent to which they are taxable will be calculated in the rule computation respondent made various computational changes to petitioners’ taxable_income because the increase in constructive dividends increased petitioners’ taxable_income so that the limitation of itemized_deductions was increased itemized_deductions were eliminated the standard_deduction was allowed and the exemption_amount under sec_151 was reduced the extent to which these changes affect petitioners’ ultimate liability will be calculated in the rule computation respondent determined petitioner had self- employment income that petitioner was liable for the self-employment_tax on that income and that petitioner was entitled to a deduction for a -- - portion of that tax petitioner’s liability is decided in the body of the opinion the deduction is computational respondent concedes petitioners may be entitled to deduct a larger amount for charitable_contributions for the taxable_year as and to the extent shown in the rule computation respondent determined petitioners were liable for the fraud_penalty pursuant to sec_6663 on the portion of the underpayment attributable to the constructive dividends and the income from self employment respondent concedes that mrs cordes is not liable for that penalty the parties stipulated that for the following distributions constitute constructive dividends from eci dollar_figure from diversion of checks from unidentified loans dollar_figure from diversion of tag refunds and dollar_figure from excess payoffs the parties stipulated that for dollar_figure from an unexplained source of funds constitutes a constructive_dividend from cfc respondent concedes that portion of his determination in excess of the parties’ stipulation petitioners concede receiving dollar_figure in social_security_benefits in the extent to which they are taxable will be calculated in the rule computation respondent made various computational changes to petitioners’ taxable_income because the increase in constructive dividends increased petitioners’ taxable_income so that the limitation of itemized_deductions was increased itemized_deductions were eliminated the standard_deduction was allowed and the exemption_amount under sec_151 was reduced the extent to which these changes affect petitioners’ ultimate liability will be calculated in the rule computation respondent determined petitioner had self- employment income that petitioner was liable for the self-employment_tax on that income and that petitioner was entitled to a deduction for a portion of that tax petitioner’s liability is decided in the body of the opinion the deduction is computational respondent concedes petitioners may be entitled to deduct a larger amount for charitable_contributions for the taxable_year as and to the extent shown in the rule computation respondent determined petitioners were liable for -- -- the fraud_penalty pursuant to sec_6663 on the portion of the underpayment attributable to the constructive dividends and the income from self employment respondent concedes that mrs cordes is not liable for that penalty


internal_revenue_service number release date index number - -------------------------------------------------- ----------------------------- -------------------------------------------- -------------------------- - department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------------- id no telephone number --------------------- refer reply to cc tege eoeg teb presp-142833-06 date date dear -------------- this letter is in response to your application_for an allocation of authority to issue --------- ------------------in clean renewable energy bonds crebs under sec_54 of the internal_revenue_code the code sec_54 of the code imposes a limitation of dollar_figure on the amount of crebs which may be issued to finance qualified projects the limitation sec_54 provides that the limitation is to be allocated by the secretary of treasury in such manner as the secretary deems appropriate except that no more than dollar_figure of the limitation may be allocated to finance qualified projects of qualified borrowers which are governmental bodies section of notice_2005_98 2005_52_irb_1211 provides that the limitation will be allocated among qualified projects for which a share of such limitation has been requested beginning with the project s requesting the smallest share in dollar amount and continuing with the project s requesting the next-smallest share until the total limitation has been exhausted however in the event that dollar_figure has been allocated to qualified projects of qualified borrowers that are governmental bodies the remaining shares of the limitation will be allocated under the methodology described in the previous sentence only to qualified projects of qualified borrowers that are not governmental bodies for purposes of allocating the limitation among projects all qualified projects located at the same site and owned by the same qualified_borrower are treated as a single project and each project is treated as requesting a single allocation an allocation of shares of the limitation cannot be made with respect to the projects owned by the borrowers listed in appendix a because such borrowers are governmental bodies and dollar_figure has already been allocated to applications requesting a presp-142833-06 smaller share of the limitation to finance qualified projects owned by qualified borrowers that are governmental bodies we appreciate your submission of the application_for our consideration and encourage you to continue to pursue your plans for constructing a clean renewable energy project sincerely assistant chief_counsel exempt_organizations employment_tax government entities tax exempt government entities by timothy l jones senior counsel tax-exempt_bonds branch presp-142833-06 borrower name appendix a project type project location -------------------------------- ---------------------- landfill_gas facility -------------------------------- ------------------------------ -------------------------------- ---------------------- landfill_gas facility landfill_gas facility -------------------------------- ---------------------- landfill_gas facility -------------------------------- ---------------------- landfill_gas facility -------------------------------- ---------------------- landfill_gas facility -------------------------------- ---------------------- landfill_gas facility -------------------------------- ---------------------- landfill_gas facility -------------------------------- ---------------------- open-loop_biomass facility -------------------------------- -------------------------------- ---------------- -------------------------------- ------ -------------------------------- -------------------------- -------------------------------- ------- -------------------------------- -------------------------- -------------------------------- --------------- -------------------------------- -------------------------------- --------------- -------------------------------- ------------- amount requested --------------- --------------- --------------- --------------- --------------- --------------- --------------- ----------------