Approved Minutes - Wednesday February 4, 2000

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

TAXPAYER BILL OF RIGHTS REIMBURSEMENT CLAIM HEARING

Joy E. Brown, Jr., and Ann T. Brown,

Stewart Harlow and Barbara Harlow, TBR 99-001-F, 17979

1997-98, $10,423.86

For Claimants: Robert F. DeMeter, Attorney

Joy E. Brown, Jr.

For Franchise Tax Board: Terry Collins, Counsel

Jozel Brunett, Counsel

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

Issue: What is the appropriate hourly rate for reimbursement of attorney and paralegal fees under Revenue and Taxation Code Section 21013.

Mr. Parrish and Mr. Chiang entered the Boardroom.

Action:Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish passing and then voting yes, the Board ordered that the action of the Franchise Tax Board be sustained.

FRANCHISE AND INCOME TAXES HEARINGS

Carl R. and Sandra A. Kikerpill, 99R-0042, 89002468170

1996, $4,682.75

For Appellant: Sandra Kikerpill

Carl Kikerpill

Bruce Watson, Witness

For Franchise Tax Board: Jozel Brunett, Counsel

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

Issue: Whether appellants have established reasonable cause to abate the penalty for failure to furnish information after written request.

Appellant’s Exhibit: A-1 Letters (Exhibit 2.5)

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.

Exhibits to these minutes are incorporated by reference.

Bill Marcum, 99A-0124, 89002465500

1985, $753.80

For Appellant: No Appearance

For Franchise Tax Board: Mark McEvillly, Tax Counsel

Action:The Board took no action.

Jeffry Winters, 99R-0309, 89002469180

1993, $21,600.15

For Appellant: Jeffry Winters

Murray Hutchings, CPA

For Franchise Tax Board: Jozel Brunett, Tax Counsel

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

Issue: Whether appellant’s late filing of his claim for refund may be excused based on reasonable cause.

Appellant’s Exhibit: A-1 Exhibits listed A-G (Exhibit 2.6)

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 sustained the action of the Franchise Tax Board, and supported the appellant’s filing a Board of Control claim. Ms. Mandel did not participate in the support of the Board of Control claim.

Louis L. and Kelly Gonda, 98A-1368, 89002467740

1990, $84,437

1991, $107,748

1992, $80,430

1993, $44,142

1994, $40,320

For Appellant:No Appearance

For Franchise Tax Board: Renel Sapiandante, Tax Counsel

Action:The Board took no action.

Simon and Virginia Ramo, 96R-0120, 89002465530

1985, $24,193

For Appellant: Appearance Waived

For Franchise Tax Board: Ann Hoover, Tax Counsel

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

Issue: Whether the stock of TRW, Inc. that appellants sold in 1985, qualified as small business stock.

Whether appellants are allowed to treat the exchange of qualified small business stock for non-qualified stock as a sale for purposes of excluding gain from the subsequent sale of the non-qualified stock.

Action:Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Ms. Mandel voting yes, Mr. Chiang abstaining, the Board sustained the action of the Franchise Tax Board.

David Dillehay and Lorraine Dillehay-Slayton, 99A-0151, 89002467120

1991, $49,786

1992, $2,217,905

For Appellant: Zane S. Averbach, Attorney

David Dillehay

For Franchise Tax Board: Terry Collins, Tax Counsel

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

Issue: Whether appellants have established that they changed their domicile to Texas for 1991 or 1992

Whether appellants were residents of Texas during any portion of 1991 or 1992.

Action:Upon motion of Mr. Klehs, 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 submitted for decision.

Ms. Mandel left the Boardroom and Mr. Chivaro entered.

Max E. and Betty D. Meyer, 98A-1321, 89002466640

1993, $4,564

For Appellant: Max E. Meyer

Betty D. Meyer

For Franchise Tax Board: Natasha Sherwood-Page, Tax Counsel

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

Issue: Whether a distribution from an IRA funded by a lump sum withdrawal from appellant-husband'’ pension plan while appellants were residents of Illinois is subject to tax by California, when appellants were California residents at the time the IRA distributions were made.

Appellant’s Exhibit: A-1 Statement of Facts with attachments (Exhibit 2.7)

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

The Board recessed at 10:17 a.m. and reconvened at 10:25 a.m. with

Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Mr. Chivaro present.

ACTION ON APPEAL HEARD FEBRUARY 4, 2000

Upon motion of Mr. Klehs, seconded by Mr. Chivaro and duly carried, Mr. Parrish, Mr. Klehs and Mr. Chivaro voting yes, Mr. Andal and Mr. Chiang voting no, the Board sustained the action of the Franchise Tax Board in the appeal of Max E. and Betty D. Meyer, 98A-1321, 89002466640.

FRANCHISE AND INCOME TAXES HEARINGS

Roy E. Hanson Jr., Mfg. & Subsidiary, 99R-0053, 89002458800

Year ending 6-30-84, $14,871

Year ending 7-1-88, $10,938

For Appellant: Appearance Waived

For Franchise Tax Board: Renel Sapiandante, Tax Counsel

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

Issue: Whether appellant has shown that it is entitled to a bad debt deduction in the amount of $154,909 with respect to its 1984 income year.

Whether appellant has shown that it is entitled to a bad debt deduction in the amount of $117,610 with respect to its 1988 income year.

Action:Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Mr. Chivaro voting yes, the Board sustained the action of the Franchise Tax Board.

Mr. Chivaro left the Boardroom and Ms. Mandel entered.

Hugo A. Abarca, Jr., 99R-0227, 89002468290

1990, $1 or more

For Appellant: Hugo Abarca

Ruben Porras, Accountant

For Franchise Tax Board: Jean Cramer, Tax Counsel

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

Issue: Whether appellant filed a claim for refund for 1990 before the statute of limitations expired on the amounts in issue.

Whether the statute of limitations may be waived because of financial hardship experienced by appellant from 1988 through the date of filing the 1990 return on June 17, 1998

Appellant’s Exhibit: A-1 Letter with attachments(Exhibit 2.8)

Respondent’s Exhibit: R-1 Account Analysis (Exhibit 2. 9)

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.

Homer and Elizabeth Beldt, 97A-0635, 89002466440

1990, $314,137

1991, $3,104

For Appellant: Thomas Greco, Attorney

Kevin O’Hara, Attorney

For Franchise Tax Board: Jack Stilwell, Tax Counsel

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

Issue: Whether appellants have shown that they are entitled to a nonrecognition of gain from the sale of real property as part of a like-kind exchange under Internal Revenue Code section 1031.

Appellant’s Exhibit: A-1 Declaration of Thomas A.Greco (Exhibit 2.10)

Respondent’s Exhibit: R-1 Declaration of Trust (Exhibit 2.11)

Action:Mr. Parrish moved that the appeal be granted. The motion was seconded by Mr. Klehs but failed to carry, Mr. Parrish voting yes, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no.

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.

David L. Kahn, 97A-0531, 89002463430

1984, $12,345.30

1985, $10,065.65

1986, $13,769.27

1987, $2,870.78

For Appellant: David L. Kahn

For Franchise Tax Board: Jean Cramer, Tax Counsel

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

Issue: Whether appellant has discharged his tax liability for the appeal years in bankruptcy.

Whether respondent’s NPA’s for the appeal years are barred as untimely.

Whether the provisions governing the solar energy tax credit and the energy conservation tax credit permit refunds of an amount in excess of appellant’s "net tax".

Whether appellant has shown that he is entitled to an energy conservation tax credit for 1984.

Whether appellant is entitled to a 1987 NOL carryback.

Whether appellant is entitled to "income average" for 1984.

Appellant’s Exhibit: A-1 Form 872, Consent to Extend the Time to Assess Tax

(Exhibit 2.12)

Respondent’s Exhibit: R-1 U.S. Tax Court Decision on David Lawrence Kahn v. Commissioner of Internal Revenue, and Various Income Tax Laws (Exhibit 2.13)

Action:Upon motion of Mr. Klehs, seconded by Ms. Mandel 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.

Manlio B. and Carolina Melillo, 99A-0356, 89002469710

1989, $1,690

1990, $ 3,539

1991, $3,059

1992. $553

For Appellant: No Appearance

For Franchise Tax Board: Terry Collins, Tax Counsel

Action:The Board took no action.

Hardage Group Of Companies, 98A-1170, 89002462860

year ended 12-31-91, $35,834

For Appellant: No Appearance

For Franchise Tax Board: Carl Joseph, Tax Counsel

Action:The Board took no action.

Stephen W. and Martha Hoehns, 99A-0380, 16337

1992, $34,170

For Appellant: No Appearance

For Franchise Tax Board: Richard Gould, Tax Counsel

Action:The Board took no action.

Cherish F. Robinson, 99A-0366, 89002469810

1991, $8,045

Alex Tiffany, 99A-0367, 89002469820

1991, $9,347

Crystal Tiffany, 99A-0368, 89002469830

1991, $8,045

For Appellant: Arthur T. Schaertel, Attorney

Alex Tiffany

For Franchise Tax Board: Mark McEvilly, Tax Counsel

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

Issue: Whether appellants have shown that respondent incorrectly determined the amount of their settlement proceeds that were excludable from gross income.

Respondent’s Exhibit:A-1 Supreme Court Decision regarding Punitive Damages (Exhibit 2.14)

Action:Upon motion of Mr. Klehs, seconded by Mr. Andal and duly carried,

Mr. Andal, Mr. Parrish, Mr. Klehs and Ms. Mandel voting yes, Mr. Chiang voting no, the Board ordered that the action of the Franchise Tax Board be modified.

FINAL ACTION ON APPEALS HEARD FEBRUARY 4, 2000

Upon motion of Mr. Klehs, seconded by Ms. Mandel and duly carried,

Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal and Mr. Parrish voting no, the Board sustained the action of the Franchise Tax Board in the appeal of Carl R. and Sandra A. Kikerpill, 99R-0042, 89002468170.

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 Hugo A. Abarca, Jr., 99R-0227, 89002468290.

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 for the period 1991 in the appeal of David Dillehay and Lorraine Dillehay-Slayton, 99A-0151, 89002467120.

Upon motion of Mr. Andal, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang, Ms. Mandel voting yes, the Board modified the action of the Franchise Tax Board for the period 1992.

Upon motion of Mr. Andal, seconded by Mr. Klehs 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 for the Florin Road property in the appeal of Homer and Elizabeth Beldt, 97A-0635, 89002466440.

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried,

Mr. Andal, Mr. Parrish and Ms. Mandel voting yes, Mr. Klehs and Mr. Chiang voting no, the Board reversed the action of the Franchise Tax Board for the American and Pringle properties.

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried,

Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs voting no, the Board ordered that the penalty be deleted.

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 David L. Kahn, 97A-0531, 89002463430.

Mr. Andal and Mr. Klehs left the Boardroom.

FRANCHISE AND INCOME TAXES HEARINGS

Matthew F. Kuckowicz, 99A-0185, 89002468260

1994, $8,858.50

For Appellant: Matthew Kuckowicz

For Franchise Tax Board: Mark McEvilly, Tax Counsel

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

Issue: Whether appellant is entitled to relief as an innocent spouse.

Whether the fraud penalty should apply.

Appellant’s Exhibit: A-1 Superior Court Minute Orders (Exhibit 2.15)

Respondent’s Exhibit: R-1 R&T Code Section 18533 (Exhibit 2.16)

Mr. Klehs entered the Boardroom.

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

Glen D. Silver, 99A-0026, 89002459240

1995, $10,363.20

1996, $23,728.75

For Appellant: VeraLouise Kleinfeld Pfeiffer, Attorney

Lynda Wall, Attorney

For Franchise Tax Board: Mark McEvilly, Tax Counsel

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

Issue: Whether appellant has shown that he did not earn taxable income in California during 1995 and 1996.

Whether appellant has shown that penalties imposed are erroneous.

Whether a frivolous appeal penalty should be imposed.

Appellant’s Exhibit: A-1 Information Practices Act and Public Records Act Requests for Information (Exhibit 2.17)

Respondent’s Exhibit: R-1 W-2 Forms and Attachments (Exhibit 2.18)

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

The Board recessed at 12:20 p.m. and reconvened at 12:25 p.m. with

Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

ACTION ON APPEALS HEARD FEBRUARY 4, 2000

Upon motion of Mr. Klehs, seconded by Mr. Parrish and duly carried,

Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel voting no, the Board sustained the Franchise Tax Board in the appeal of Matthew F. Kuckowicz, 99A-0185, 89002468260, and deleted the fraud penalty.

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal absent, the Board sustained the action of the Franchise Tax Board in the appeal of Glen D. Silver, 99A-0026, 89002459240, and assessed a frivolous appeal penalty for each year of the appeal.

The Board adjourned at 12:30 p.m..

The foregoing minutes are adopted by the Board on March 16, 2000