Approved Minutes – Thursday, August 31, 2000

The Board met at its offices at 5901 Green Valley Circle, Culver City, at 9:00 a.m. with Chairman Andal, Mr. Klehs and Mr. Chiang present, and Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

CORPORATE FRANCHISE AND PERSONAL INCOME TAXES HEARINGS

Manfred and Claudia Rosenfeld, 29615
1994, $948.54 Claim for Refund

For Claimant: Manfred Rosenfeld
Claudia Rosenfeld
For Franchise Tax Board: Jozel Brunett, Supervising Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether respondent abused its discretion in denying appellant's request for an abatement of interest.

Appellant's Exhibit:Letter (Exhibit 8.7)

Mr. Parrish entered the Board room.

Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the Mr. Rosenfeld summary be included in Appeals Section summary.

Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be submitted for decision.

Exhibits to these Minutes are incorporated by reference.

James A. Owens, 47192
1983, $2,061.00 Claim for Refund

For Claimant: Philip Garrett Panitz, Attorney
Ryan D. Schaap
For Franchise Tax Board: Cynthia Kent, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether appellant's claim for refund was filed before the expiration of the applicable statutes of limitation.

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be submitted for decision.

Anthony M. Mayta, 47197
1984, $4,138.00

For Claimant: Philip Garrett Panitz, Attorney
Ryan D. Schaap
For Franchise Tax Board: Cynthia Kent, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether appellant's claim for refund was filed before the expiration of the applicable statute of limitations

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the claim for refund be submitted for decision.

Bo Tommy and G. Jean Gustafsson, 42818
1983, $1,403.00 Claim for Refund
1984, $328 Claim for Refund
1985, $1,406.00 Claim for Refund
1986, $1,107.00 Claim for Refund

For Claimant: Philip Garrett Panitz, Attorney
Ryan D. Schaap
For Franchise Tax Board: Cynthia Kent, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether appellant's claim for refund was filed before the expiration of the applicable statute of limitations

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the claim for refund be submitted for decision.

Eileen P. Tobis, 99A-0398; 15714
1997, $1, 158.00 Assessment

For Appellant: Eileen P. Tobis
For Franchise Tax Board: Kathleen Cooke, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether appellant has shown that she qualified for head of household filing status for 1997.

Appellant's Exhibit:Declaration (Exhibit 8.8)

Action: Upon motion of Mr. Chiang, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be submitted for decision.

Clinton and Margaret Rider, 99A-0141; 89002465580
1975, $ 6,503.40 Assessment
1976, $12,972.00 Assessment

For Appellant: Dennis Brager, Attorney
For Franchise Tax Board: Jean Cramer, Tax Counsel
Jozel Brunett, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether respondent's proposed assessments for 1975 and 1976 are barred by the statute of limitations.
Whether respondent's deficiency assessments for 1975 and 1976, based on a federal change as reflected in appellant's U.S. District Court settlement, are invalid when the IRS never issued a Notice of Deficiency (NOD) and appellants conditioned their waiver of the NOD on the IRS acceptance of their offer in compromise, which it did not accept.
Whether the Board has jurisdiction to review appellants' request for an abatement of interest for the years on appeal, and if so, whether interest may be abated, based upon unreasonable delay.

Appellant's Exhibit:Order of Dismissal (Exhibit 8.9)

Respondent's Exhibit:Appeals Case Memo (Exhibit 8.10)

Action: Upon motion of Ms. Mandel, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be granted.

The Board recessed at 10:35 a.m. and reconvened at 10:40 a.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

Roland J. and Helen M. Jensen, 99A-0454; 18047
1996, $65,505.00 Assessment

For Appellant: No Appearance
For Franchise Tax Board: Sherman Eatmon, Counsel

Action: The Board took no action.

Asadur and Petra Tursugian, 42988
1993, $33,780.00 Assessment

For Appellant: Ellis Stern, Attorney
For Franchise Tax Board: Jean Cramer, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether appellants have shown that settlement proceeds in the amount of $373,504, received by appellant in a settlement of a lawsuit, must be included in 1993 taxable income

Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be submitted for decision.

Fuji Bank, Limited & Subsidiaries, 99R-0258; 89002468660
3-31-93, $1,942,826 Claim for Refund
3-31-94, $2,046,758 Claim for Refund

For Claimant: Prentiss Willson, Attorney
Glenn Bystrom, CPA
Steven M. Danowitz, Partner
Alexander Yanotti, Participant
For Franchise Tax Board: Carl Joseph, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No disqualifying contributions were disclosed.

Issues: Whether appellant's appeal should be dismissed due to a failure to exhaust administrative remedies.
Whether appellant has failed to meet its burden of proving that it is entitled to include gross proceeds from securities transactions in the sales factor denominator.
Whether the inclusion of gross rather than net receipts should be denied due to its distortive effect on the apportionment of appellant's business income.
Whether appellant has proven that the transactions in issue qualify as principal sales.

Claimant's Exhibit:Chronology of Issuance of IDRs & AIPs (Exhibit 8.11)

Mr. Chiang announced he would not be participating and left Board room.

Action: Upon motion of Mr. Klehs, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Ms. Mandel voting yes, Mr. Chiang not participating, the Board ordered that the claim for refund be submitted for decision.

Mr. Chiang entered the Board room.

Richard and Francene Herr, 47675
1993, $1,334.00 Assesment

For Appellant: Richard Herr
For Franchise Tax Board: Jean Cramer, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether the assessment was time-barred by any statute of limitations.
Whether the liability was discharged in appellants' bankruptcy action.

Appellant's Exhibit:1993 Tax Form 2119 (Exhibit 8.12)

Mr. Klehs left the Board room.

Action: Upon motion of Mr. Chiang, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs absent, the Board ordered that the appeal be submitted for decision.

George P., Jr., and Christina Hobson, 53607
1994, $3,868.00 Assessment, $773.60 Penalty
George P. Hobson, Jr., 49002
1995, $2,039.00 Assessment, $407.80 Penalty

For Appellant: George P. Hobson, Jr., Attorney
For Franchise Tax Board: Sherman Eatmon, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether appellants, whose 1994 and 1995 federal income tax deficiencies were reduced following the application of Internal Revenue Code (IRC) Section 1341, are entitled to similar reduction to their 1994 and 1995 California income tax deficiencies.

Respondent's Exhibit:1994 Negligence Underpayment Explanation (Exhibit 8.13)

Mr. Klehs entered the Board room.

Action: Upon motion of Mr. Parrish, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel voting no, the Board ordered that the penalty be deleted and the remainder of the appeal be submitted for decision.

Qian Gao, 42787
1995, $1,071.80 Claim for Refund

For Appellant: Hector H. Castaneda, CPA
For Franchise Tax Board: Terry Collins, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether a tax treaty between the United States and China bars California from taxing appellant's California-source income.
Whether a scholarship grant received by appellant is excluded from gross income.

Action: Upon motion of Mr. Chiang, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be granted.

Antoinette Sementilli, 99A-0387; 18900
1993, $ 3,250.00 Assessment
1994, $21,227.00 Assessment, $15,920.00 Penalty
1995, $ 3,155.00 Assessent

For Appellant: Antoinette Sementilli
For Franchise Tax Board: Terry Collins, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether appellant received taxable income in the years in question which she failed to report.
Whether appellant is liable for the fraud penalty for 1994.

Appellant's Exhibit:Letter (Exhibit 8.14)

Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be submitted for decision.

The fraud penalty was dismissed by the Franchise Tax Board prior to this hearing.

FINAL ACTION ON APPEALS HEARD

Upon motion of Ms. Mandel, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish abstaining, the Board sustained the action of the Franchise Tax Board in the appeal of Eileen P. Tobis, 99A-0398; 15714.

Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board sustained the action of the Franchise Tax Board in the appeal of Manfred and Claudia Rosenfeld, 29615.

Upon motion of Mr. Klehs, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish voting no, the Board sustained the action of the Franchise Tax Board in the claim for refund of James A. Owens, 47192.

Upon motion of Mr. Klehs, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish voting no, the Board sustained the action of the Franchise Tax Board in the claim for refund of Anthony M. Mayta, 4719.

Upon motion of Mr. Klehs, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish voting no, the Board sustained the action of the Franchise Tax Board in the appeal of Bo Tommy and G. Jean Gustafsson, 42818.

Upon motion of Mr. Chiang, seconded by Mr. Klehs and duly carried, Mr. Andal, Mr. Klehs and Mr. Chiang voting yes, Mr. Parrish and Ms. Mandel voting no, the Board sustained the action of the Franchise Tax Board in the appeal of Asadur and Petra Tursugian, 42988.

Mr. Klehs moved to sustain the action of the Franchise Tax Board in the claim for refund of Fuji Bank, Limited & Subsidiaries, 99R-0258; 89002468660. The motion failed for lack of a second.

Upon motion of Mr. Parrish, seconded by Ms. Mandel and duly carried, Mr. Andal, Mr. Parrish and Ms. Mandel voting yes, Mr. Klehs voting no, Mr. Chiang not participating, the Board ordered be granted.

Mr. Parrish moved to grant in the appeal of Richard and Francene Herr, 47675. The motion failed for lack of a second.

Upon motion of Mr. Chiang, seconded by Ms. Mandel and duly carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish voting no, the Board sustained the action of the Franchise Tax Board.

Upon motion of Mr. Andal, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board sustained the action of the Franchise Tax Board in the appeal of George P., Jr., and Christina Hobson, 53607, and George P. Hobson, Jr., 49002.

Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board sustained the action of the Franchise Tax Board in the appeal of Antoinette Sementilli, 99A-0387; 18900.

CORPORATE FRANCHISE AND PERSONAL INCOME TAXES HEARINGS

Shelton A. Hill, 43151
1994, $493.00 Assessment, $98.60 Penalty
1995, $1,850.00 Assessment, $370.00 Penalty

For Appellant: Appearance Waived
For Franchise Tax Board: Jozel Brunett, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether appellant has shown respondent's determination, that appellant is liable for the payment of income tax and penalties, is erroneous.
Whether this Board should apply a penalty for filing and maintaining a frivolous appeal.

Appellant's Exhibit:Letters (Exhibit 8.15)

Action: Mr. Andal moved to accept the appellant's filing, sustain the action of the Franchise Tax Board and impose a $500.00 per year frivolous appeals penalty. The motion failed for lack of a second.

Upon motion of Mr. Andal, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered to sustain the action of the Franchise Tax Board and accept the submission.

Upon motion of Mr. Andal, seconded by Mr. Klehs and duly carried, Mr. Andal, Mr. Klehs and Ms. Mandel voting yes, Mr. Parrish and Mr. Chiang voting no, the Board imposed a $500.00 per year frivolous filing appeals penalty.

Mr. Chiang and Mr. Klehs left the Board room.

MCC Development Corporation, 28618
03-31-89, $ 19,425.00 Assessment
03-31-90, $112,536.00 Assessment
Mitsubishi Cement Corporation, 28620
03-31-89, $423,382.00 Assessment
03-31-90, $442,541.00 Assessment

For Appellant: Steven M. Danowitz, Representative
Glenn Bystrom, Representative
Kimball McCloud, President
For Franchise Tax Board: Norman Scott, Tax Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No disqualifying contributions were disclosed.

Issues: Whether appellants were unitary with their foreign parent (Mitsubishi Mining & Cement Company).
Whether the apportionment formula used by respondent unconstitutionally distorts appellants' income.

Appellant's Exhibit:Charts (Exhibit 8.16)

Action: Upon motion of Mr. Parrish, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish and Ms. Mandel voting yes, Mr. Klehs and Mr. Chiang absent, the Board ordered that the appeal be granted.

Douglas Kisaka, 98A-1144; 89002463610
1995, $3,721.20

For Appellant: No Appearance
For Franchise Tax Board: Jean Cramer, Tax Counsel

Action: The Board took no action

The Board adjourned at 3:10 p.m.

The foregoing minutes are adopted by the Board on December 14, 2000